Practitioner views of goodwill accounting under US GAAP

Abstract

Purpose Accounting standards for goodwill may intensify the agency conflict. Since auditors evaluate intangible asset valuations, this study examines to what extent being an auditor (including Big 4 auditors) and being female as indicators of professional skepticism and conservatism predict accounting professionals’ critical views of goodwill accounting under US GAAP.

Design/methodology/approach Statistical analyses of a survey of accounting professionals in the Pacific Northwest region of the United States.

Findings The respondents’ views are dispersed from trust in GAAP to views reflecting management opportunism in goodwill accounting. While being an auditor (including Big 4 auditors) does not predict a critical perception, being a female auditor is correlated with critical views to some extent. Research limitations/implications – The survey was carried out in a limited geographical area and personal contacts were used to maximize the response rate, which may limit generalizability.

Practical implications Standard setters can use the results to learn how practitioners perceive the current accounting standards for goodwill. The results provide users and preparers knowledge about potential pitfalls of goodwill accounting. Preparers could increase transparency to alleviate user concerns regarding managerial opportunism in goodwill accounting.

Originality/value This paper extends the IFRS-based literature exploring practitioners’ perceptions of accounting standards by focusing on goodwill accounting in the US GAAP environment. This study also contributes to the auditing literature by providing further evidence on how gender moderates an auditor’s perception of accounting standards.