Original Research

A review of research performed on the approach to the subsequent measurement of goodwill

Humnaaz Jhavary, Dusan Ecim, Wayne Van Zijl
Journal of Economic and Financial Sciences | Vol 17, No 1 | a928 | DOI: https://doi.org/10.4102/jef.v17i1.928 | © 2024 Humnaaz Jhavary, Dusan Ecim, Wayne van Zijl | This work is licensed under CC Attribution 4.0
Submitted: 23 October 2023 | Published: 03 May 2024

About the author(s)

Humnaaz Jhavary, School of Accountancy, Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, South Africa
Dusan Ecim, School of Accountancy, Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, South Africa
Wayne Van Zijl, School of Accountancy, Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, South Africa

Abstract

Orientation: By taking stock of goodwill accounting literature, the article identifies key themes and highlights the lack of innovation in goodwill and intangibles’ accounting evolution.

Research purpose: This article suggests pure grounded theory research is required to develop a novel perspective on goodwill accounting.

Motivation for the study: Little progress has been made to overcome the dated issues related to goodwill impairment necessitating a genuinely fresh approach.

Research approach/design and method: A search was performed on the Scopus Database and all sources containing a combination of ‘goodwill’ and ‘impairment’, ‘amortisation’ or ‘depreciation’ in the title, abstract or keywords were extracted. A total of 231 sources from 1990 to 2022 are analysed. These are coded with the support of a content analysis and a bibliometric analysis.

Main findings: This research identifies the dominance of positivist quantitative research and financial economics as a key issue that may be holding back progress on the subsequent treatment of goodwill. The research iterates three core issues, namely: (1) that the impairment-only approach allows too much managerial discretion, (2) an inability to reasonably estimate the useful life of goodwill deters many from supporting goodwill amortisation and (3) sometimes goodwill may be a wasting asset while others may genuinely have an indefinite useful life.

Practical/managerial implications: This research may be relevant for standard setters when considering goodwill accounting methods.

Contribution/value-add: The research provides insights into existing literature and highlights areas for future accounting research.


Keywords

agency theory; amortisation; depreciation; goodwill; impairment; value relevance

JEL Codes

M41: Accounting

Sustainable Development Goal

Goal 9: Industry, innovation and infrastructure

Metrics

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