This website uses cookies to ensure you have the best experience. Learn more

Use The Effect Of Goodwill Amortization On The Usefulness Of Eps To Evaluate The Relationship Between Sfas No. 142 And Fasb Conceptual Framework

1995 words - 8 pages

Use the Effect of Goodwill Amortization on the Usefulness of EPS to Evaluate the Relationship between SFAS No. 142 and FASB Conceptual FrameworkAbstractIn 2001, the Financial Accounting Standards Board FASB approved significant changes in the way income is determined for combined business entities. In an effort to make Goodwill and other intangible assets accounting more transparent, SFAS No. 142, Goodwill and Other Intangible Assets, requires firms to stop Goodwill amortization. Obviously, SFAS No. 142 supersedes APB (Accounting Principles Board) Opinion No. 17, Intangible Assets. My research will focus on comparing earnings per share (EPS) before Goodwill amortization and earnings per share after Goodwill amortization as alternative indicators of share values for a random sample of listed firms over the period 1993-1998 from S&P 500. I find that EPS before Goodwill amortization is more accurate than EPS after Goodwill amortization as the indicator of share values, and that Goodwill amortization simply adds noise to investment analysis. These results testify that SFAS No. 142 matches the FASB conceptual framework better than APB Opinion No. 17.1.BackgroundGoodwill is the difference between a firm's total book net assets and the fair-market value of its identifiable net assets. The intangible asset represents the name of the firm, its reputation, competitive or other intangible advantages or resources that are expected to enable the firm to generate more earnings than normal return by its identifiable net assets . Goodwill may be developed internally by, for example, building customer loyalty, developing human resources, or utilizing assets more efficiently than competitors. Alternatively, Goodwill may be purchased "whole" when one firm acquires another.The pervious accounting treatment for Goodwill is governed by Accounting Principles Board Opinion No. 17--Intangible Assets. Under APB 17, Goodwill that is developed internally is not recognized as an asset. In contrast, the cost of Goodwill that is acquired as a result of a business combination should be recognized as an asset by the acquiring firm. APB 17 dictates that this asset, like other intangibles, must be amortized against revenues over "the periods expected to be benefited" up to a maximum of 40 years. Because Goodwill is recognized as an asset only when business acquisition occurs, Goodwill only shows up in consolidated financial statements under the rules of APB 17.2. Criticism of the APB Opinion No. 17The APB Opinion No. 17 that requires Goodwill be amortized over a maximum of 40 years had frequently been criticized by financial statement users and financial analysts before 2001. They argued that Goodwill amortization was unlikely to represent a company's current or future performance, so far as reduced the usefulness of EPS as an indicator of share values, although they noticed that Goodwill was an increasingly important economic resource for many companies and was an increasing...

Find Another Essay On Use the Effect of Goodwill Amortization on the Usefulness of EPS to Evaluate the Relationship between SFAS No. 142 and FASB Conceptual Framework

The cause and effect relationship between crime and society, Institutionalization of Crime and Prisons Module - University of Leeds

1474 words - 6 pages The aim of this essay is to form a strong understanding on the cause and effect relationship of imprisonment and society. This is important in coming to the decision of whether it is a particular person drawn to a life inside, or a failing punishment order. To do this a broad perspective must be obtained through the study of statistics and individual cases as well as academic writing, news articles and theories. Due to the high success and low

Explore the relationship between political liberalism and the concept of ‘freedom of press’. Critically evaluate how it is applied both in the pri

946 words - 4 pages “Liberalism is an ideology based on the commitment to individualism, freedom, toleration and consent”. There are two types of liberalism; classical liberalism and modern liberalism. Classical liberalism is an extreme form of individualism. People are seen as egotistical and self-reliant. Classical liberalists are proprietors of themselves and their abilities who believe they own nothing to society or others. This suggests that there is an

What is the Relationship Between Media Use and Academic Performance?

1038 words - 5 pages purpose of this study was to test the relationship between social media use and academic performance. The findings in this research experiment are consistent with those of Karpinski (2010). Researchers predicted that participants’ involvement in social media use would effect academic performance and show some sort of correlation after data was tested. Research on this matter has grown over the years especially with Facebook becoming such a pivotal

Consider the relationship between the growth of industry in the twentieth century and the increasing use of bureaucratic forms of organisational structure during the same period

1709 words - 7 pages ). Duties are divided into simpler, more specialised tasks allowing the organization to use personnel and job retraining sources effectively. Managers and employees are assigned and perform duties based on specialisation and personal expertise, therefore learning to do one set of activities well. Subsequently the efficiency of each employee increases and it becomes easier for managers to supervise employees as they work on one specific activity

As one reads Confederation: The Use and Abuse of History by D.G. Creighton, it becomes apparent that he exemplifies no secrecy when referring to the present day problems emerging between Quebec and...

1399 words - 6 pages As one reads Confederation: The Use and Abuse of History by D.G. Creighton, it becomes apparent that he exemplifies no secrecy when referring to the present day problems emerging between Quebec and the rest of Canada. His bias toward Quebec is of importance when considering the immense role Lower Canada played in the formation of Confederation. His article however, seems to rest solely on an interpretation of unfounded facts. It appears as

An Examination of the Efficiency of Fair Market Accounting: An Analysis of SFAS No. 115 and SFAS 157

1992 words - 8 pages FASB developed SFAS No. 115 within a three-step project in order to incorporate market values into the valuation of financial instruments. The first step focused on disclosing the fair value of financial instruments and was completed in December 1991 through the issuance of SFAS No. 107, Disclosure About Fair Value of Financial Instruments, requiring all organizations for fiscal years ending after December 15, 1993, to disclose the fair values of

TARGET MARKETING: THE TENDENCY TO INCREASE UNETHICAL BEHAVIOUR AND THE PROBABILITY OF BOYCOTTS: A CONCEPTUAL FRAMEWORK

3173 words - 13 pages harmfulness and consumer vulnerability. These issues collectively form the basis for assessing target marketing and are hence integral in the conceptual framework. From the conceptual framework it should give direction as to whether target marketing has impacted on the level of unethical behaviour and the possibility of a boycott.The conceptual framework brings into focus the concept of the relationship between target marketing and its impact on

The Conceptual Framework for Financial Reporting: Bega´s Current Accounting Practice of Property, Plant and Equipment

2182 words - 9 pages qualitative characteristics of useful financial information According to QC1 to QC39 of IASB Conceptual Framework, the qualitative characteristics of useful financial information identify the most useful information to the users for decision-making about the reporting entity on the basis of its financial report. If financial information is useful, it must be relevant and faithfully represented. The usefulness of financial information is enhanced if it is

Negative corelation between social networking sites use and romantic relationship quality: Gender difference in social surveillance

966 words - 4 pages in checking frequency is not equal to no overall gender difference. Marshall, Bejanyan, Castro, and Lee (2012) used intake questionnaire and discover several significant gender differences in Facebook use. First, males’s social circle tend to be larger than females and their social relationship is less stable. Second, given the same amount of time on Facebook, males are found to check their partners’ pages more often compared to females

Relationship Between Two Generations in Everyday Use by Alice Walker

885 words - 4 pages Relationship between two Generations Having a kid is an important responsibility for a parent. The teachings, values and morals that the parent imposes on the kid, will have a great impact and will determine the outcome of the kid's personality and way of living. In Everyday Use, a short fiction story by Alice Walker, also in The Bridegroom, a short fiction story by Ha Jin, two different parents and children relationship take place. In Everyday

The Usefulness of Law

812 words - 3 pages The Usefulness of Law Law is the most important thing in all over the world to keep the criminality away from each country. The law in every country is very similar except if we take out some cases in Houston Texas and Midol East that some criminals were executed. There are a lot of cases that a bad crime perpetrated without the criminal that perpetrate the crime to get arrest. Because of that, police because of their bad

Similar Essays

Use Specific And Real Examples Of Differences Between Countries To Evaluate The Usefulness And Limitations Of A Model Of Cultural Differences

1774 words - 7 pages 1.0 IntroductionThis report aims to investigate the cultural differences between Indonesia and Australia using the Hofstede's Model of Cultural Differences. It will consider the usefulness of the model and look into other theories and thoughts of others.2.0 Hofstede's Model of Cultural DifferencesDr. Geert Hofstede researched on how values in the workplace are influenced by culture. During his period of working at IBM he gathered and studied

The Relationship Between Delinquency And Drug Use

2017 words - 8 pages The Relationship between Delinquency and Drug UseIn my attempt to discover if delinquency and drug use, or the sale of drugs were correlated with one another, my research lead to a positive correlation, especially when there was gang membership involved. The theory I have chosen to tie in with my review of the articles I found is the social learning theory of Edwin Sutherland known as differential association theory. According to Britannica

The Relationship Between The Colonel And Sabas In "No One Writes To The Colonel"

616 words - 2 pages went on, Sabas slowly started to show his “true colors”. Towards the end of the novel, we can clearly see through Sabas’ disguise and how he attempts to trick the colonel into selling his rooster to him instead of to someone else. Therefore, we can see that Sabas’ “true colors” were complex, ambiguous and cunning and this showed in his relationship with the colonel.

The Relationship Between And Effects Of Adolescents Electronic Media Use And Delayed Sleep Phase Disorder

1840 words - 7 pages The Relationship between and Effects of Adolescents Electronic Media Use and Delayed Sleep Phase Disorder Kids and teenagers are sleepy at school because the electronic media they have in their bedrooms leads them to have Delayed Sleep Phase Disorder (DSPD)” Evaluate the truth of this statement based on the published literature in the area. Sleep can be described as a period of rest for the body and mind, during which volition and