Abstract

This paper aims at studying the impact of the accounting treatment of goodwill on the mandatory disclosure required by the International Accounting Standard (IAS) 36 on the impairment test of goodwill. We use a sample comprising 79 companies listed on Brussels stock exchange to show that there is a great heterogeneity in current accounting treatment of goodwill. We identify two groups of companies: those that display the goodwill on a separate line in their balance sheet and those that integrate it in their intangible assets. For the later, the only way to notice the presence of goodwill is by looking at the financial statement’s notes presumably because those notes are expected to receive less scrutiny. Even if the compliance is not complete, the first group complies more with the paragraph 134 of IAS 36 than the other. Moreover, companies with a significant goodwill compared to both total assets and intangible assets are more compliant with IAS 36. The findings finally reveal that the notices issued by the Financial Service and Markets Authority (FSMA) have a limited impact on the disclosure level. There are some areas of improvement but others such as goodwill allocation to cash generating unit, determination of the recoverable amount, description of key hypothesis and the sensitivity test need more effort on compliance.

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