Subsequent Measurement of Goodwill: The Influence of Activity Sectors and Business Digitalisation

Abstract

In 2020, the International Accounting Standards Board (IASB) published the Discussion Paper (DP)/2020/1 - Business Combinations - Disclosures, Goodwill and Impairment, to receive contributions on more useful disclosures about business combinations, bringing the issue of the subsequent measurement of goodwill back into the discussion. When analysing the comment letters from preparers by sector of activity, in some sectors (Automotive, Banking, Luxury Goods, Household Appliances, Energy and Technology) no preparer prefers the impairment-only model, which suggests that perhaps, in these industries, this model is not appropriate. Some respondents say that the pace of change in technology, customer preference, competition in the market and substitute products, among others, contribute to the loss of value of goodwill acquired over time and that it is systematically replaced by internally generated goodwill (D’Orey and Carvalho, 2023). This study aims to identify the main criticisms of goodwill accounting and to analyse the influence of the sector of activity and level of business digitalisation on the subsequent measurement of goodwill. To this end, semi-structured interviews were conducted with Portuguese preparers, auditors and financial analysts. The study makes it possible to compare the perception of Portuguese stakeholders on the subsequent measurement of goodwill and to understand whether the sector of activity and the level of digitalisation of the business influence the subsequent measurement of goodwill, a pioneering aspect in goodwill research. This study contributes to the debate on the subsequent measurement of goodwill, identifying new practical and conceptual arguments adjusted to current business models, highly influenced by digital transformation, in a legal context that is still very little explored, as is the case in Portugal.