Depreciation is an accounting method used to allocate the cost of a tangible asset or physical asset over its useful life. This is necessary to measure the company's net income in each accounting period. Depreciation allows companies to earn income from the assets they own by paying for them...

Because existing brand valuation models treat the brand as a growing perpetuity, they contain an implicit assumption of future marketing expenditures sufficient to maintain the growth rates and operating margins embedded in the valuation model. As a result, these models cannot be used to...

Fair value is a term often used in the world of finance, accounting, and asset valuation, reflecting a rational and fair price that is acceptable between transacting parties in a free and competitive market. It is important to recognize that fair value determination is essential in many aspects...

The main issues of accounting reporting regarding goodwill are whether a firm’s management reliably conveys their private information about future earnings, and whether they disclose value-relevant and useful information to accounting users. In the current International Financial Reporting...

We use a case study to illustrate how different acquisition methods can result in different amounts of goodwill recognised on financial statements in China. China Merchants Bank adopted a two-step acquisition method: first, it acquired 53% of the shares of Hong Kong's Wing Lung Bank to gain...

This study addresses the problem of value relevance and accounting for goodwill positions, as the measures used in previous studies are only suitable to a limited extent for measuring the growth potentials through M&A. For this purpose, the measure of future potential (FP) is defined as a...

This paper investigates how accounting rule reform affects the usage of conditional conservatism in the property-liability (P&L) insurance industry. More specifically, whether the accounting rule changes that strengthen the internal control over financial reporting and improve the financial...

We use a case study to illustrate how different acquisition methods can result in different amounts of goodwill recognized on financial statements in China. China Merchants Bank adopted a two-step acquisition method: first, it acquired 53% of the shares of Hong Kong’s Wing Lung Bank to gain...

Most individuals at one time or another purchase and trade in an automobile. The automobile dealer and the buyer typically discuss what the trade-in value of the old car is. Also, they may talk about what the trade-in value of the new car will be in several years. In both cases a decline in...

This study examines how aggregation in financial reporting leads to information loss using a sample of firms that report individual financial assets. The level of information loss increases with the level of aggregation; however, combining assets with similar risk-factor exposures mitigates this...

Fair value estimates from external third-party sources are generally considered more reliable than internal estimates based on managerial inputs. However, even externally sourced estimates are subject to managerial opportunism, because firms can switch from one external source to another. In the...

With the wave of M&A, total amount of goodwill balances has been accumulated to a enormous number in Chinese capital market. Accounting Standards is controversial about high discretion in the goodwill subsequent measurements. This study examines whether goodwill book value is consistent with...

We propose a theory of domestic and foreign currency debt and limited commitment to exchange-rate and debt repayment policies. Exchange-rate depreciation is costly, but reduces the real value of domestic-currency debt and helps smooth consumption without the full punishment of default. However,...

To provide a fuller picture of compliance with SFAS 142, we hand-collect data to track 893 large acquisitions. Our model, which links impairments to post-acquisition performance declines and acquisition-year attributes, identifies 349 acquisitions as likely to impair. We expand compliance to...

This article regresses the market value of equity on pre-depreciation income and on depreciation expense for capital-intensive firms, referring to the coefficients from our model as valuation weights. The valuation weight on depreciation expense versus the weight on pre-depreciation income are...

Private equity investors require accurate estimates for the market value of their investments to perform optimal fund allocations and correctly diversify their portfolios. Since private equity investments are mostly privately held and do not have an active market valuation, these estimates rely...

As an incentive to increase high-impact investment and boost growth, the German Federal Government is planning to introduce a targeted temporary super depreciation allowance to support much-needed green and digital transitions. Using a calibrated multi-sector DSGE model, we find that the...

We examine the effects of fair-value accounting (FVA) and historical-cost accounting (HCA) regimes on the ex-ante financing of projects by external investors. We formulate a model highlighting the relative merits and demerits of each accounting regime, in particular the sub-optimal continuations...

Very often than not, business acquisition results in recognition of goodwill as the consideration paid to gain control of the acquiree is higher than the fair value of the net assets acquired to compensate for synergies which acquirer benefits from the business combination. Negative goodwill is...

Motivated by bank regulators’ use of level 3 fair value assets as an indicator for systemic risk, we examine whether level 3 fair value assets contribute to systemic risk buildup via the balance sheet liquidity channel and how financial reporting transparency mitigates the risk buildup. We...

When the fair value accounting (FVA) option for property, plant, and equipment was introduced in the midst of the global financial crisis, a significant proportion of Korean firms elected FVA. We attribute this unusual boom of asset revaluations to the nation’s culture of government...

Intangible assets — which include intellectual property (IP) — may involve marketing, customers, artistic works, contracts and technology that provide various economic benefits. Intangible assets generate value for businesses through: i. Direct use by contributing to product/service revenues...