How Accounting for Goodwill relies on Underlying Assumptions : a Historical Approach

For over 30 years, the role of accounting theory in standard setting has been contested in some countries. This article seeks to provide a better understanding of how theories and their basic assumptions give support to collective accounting choices. In this paper, we investigate major changes in goodwill accounting in the U.S. over the past century through a literature review. The research is aimed at showing how general assumptions on accounting govern most arguments produced in the debates.Four different treatments of goodwill have been classified depending on two major assumptions. Then, we analyzed whether the support given to each solution in the literature was consistent with these assumptions. Our findings show that there is a strong link between the dominant views on accounting and the way goodwill is accounted for in each sub-period.