Zero goodwill impairment: market indicationswithout measurement

This study examines the determinants of the recognition choice related to reporting zero goodwill impairment after an implementation of an impairment-only approach to accounting for acquired goodwill. The analysis is carried out by focusing on listed companies in an emerging economy of Malaysia from 2006-2012 that experienced declines in the market values below the book values of the net assets for three consecutive years. Regression results show that the recognition choice can be explained partly by the high book-to-market ratio, and the types of industry the firms operated. The results also show that firms that have an improvement in the operating cash flows and acquired goodwill during the year are less likely to exercise the recognition choice in reporting zero goodwill impairment. The study contributes modestly to the accounting choice literature by providing new empirical evidence on the determinants of the recognition choice related to reporting zero goodwill impairment.