An Empirical Investigation of Accounting Methods for Goodwill and Identifiable Intangible Assets: 1985 to 1989

Accounting for intangible assets represents one of the more controversial accounting standards issues. This study examines the accounting policies adopted for goodwill and for identifiable intangible assets by a sample of 150 Australian Stock Exchange listed companies over the five-year period 1985 to 1989 inclusive. Findings reveal a general decrease in the diversity of goodwill accounting policies over the study period but the converse for identifiable intangible policies. In particular, an increase in the percentage of companies electing not to amortize identifiable intangibles was found. The study provides evidence to support claims that companies have been recognizing identifiable intangibles to reduce the impact on reported operating profits of the requirement of accounting standards for the amortization of goodwill.