Date posted: 15/12/2020

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Intangibles and goodwill on balance sheets worldwide, in Australia and New Zealand

In brief

  • This study presents descriptive statistics on the level of recognition in financial reports of intangibles, goodwill, and relevant impairment from 2010 to 2020
  • Report covers Australia, New Zealand and the World. It is - categorised by firm size, sector and time
  • Is pertinent to questions raised by the IASB in its recent Discussion Paper “Business Combinations — Disclosures, Goodwill and Impairment”

A research study by CA ANZ and the University of Melbourne discusses descriptive statistics on the level of recognition in financial reports of intangibles, goodwill, and relevant impairment from 2010 to 2020. 

The brief report covers Australia, New Zealand and 119 of the most developed countries. It is categorised by firm size, sector and time. The analyses are pertinent to questions raised by the International Accounting Standards Board (IASB) in its recent Discussion Paper “Business Combinations — Disclosures, Goodwill and Impairment” and to broader discussions about accounting for goodwill, intangibles and value creation in general. 

US$8 trillion in goodwill was recognised on company balance sheets worldwide in 2020, according to the IASB, which is consistent with the analysis in this research report that shows in Australia A$111 billion was recognised and NZ$5.54 billion in New Zealand. 

The analysis also reveals: 

  • both intangibles and goodwill on balance sheets as a percentage of assets have been increasing over the past two decades
  • a skewed distribution in the amount of goodwill and intangibles recognised as a percentage of assets
  • about 20% of firms impair goodwill every year 
  • the impairment frequency and magnitude implies the effective close to complete write-down of goodwill to a zero value over a 15-year period
  • there is no evidence of goodwill being overvalued for large companies
  • there is evidence consistent with the over-valuation of goodwill for some small companies, including across the globe• the most significant issue associated with the measurement of goodwill is the level of uncertainty associated with forecasting future benefits.

These findings emphasise the importance of the current IASB’s efforts to revisit accounting for goodwill and intangibles.

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