Goodwill Impairment: A Comparative Country Analysis

In response to proposed convergence of accounting standards, we investigate whether non-U.S. firms (which list their shares on U.S. secondary markets and report under U.S. standards) are more likely to interpret and apply the accounting rules in a different manner than their U.S. counterparts. Specifically, this paper evaluates a mediation effect that non-U.S. firms will take greater goodwill impairment charges under SFAS 142 than U.S. firms. Extending earlier international accounting research (e.g., d'Arcy 2006), the study illustrates the difference between de jure harmonization (harmonized rules) and de facto harmonization (harmonized practices) and examines the impact of legal, accounting, and cultural values upon the accounting for goodwill. The findings indicate that both firm-level and country-level characteristics affect the goodwill impairment decision.