Functional Fixation Surrounding the Adoption of SFAS 142
SSRN Electronic Journal
2012
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- 4Captures
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Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangibles (FASB 2001) altered the treatment of goodwill by replacing the systematic amortization of goodwill with impairment testing. This change affected earnings in two ways by requiring many firms to take sizable goodwill impairments if they cannot justify the amount of goodwill being carried on their balance sheets and by producing a “cosmetic” boost to the earnings of all firms who previously amortized goodwill. This study investigates whether investors assign value relevance to adoption-year goodwill impairments and to the increase in earnings resulting from goodwill non-amortization. Furthermore, this study investigates whether the assigned value relevance is due to new information content or due to functional fixation. Results indicate that unsophisticated investors functionally fixate on earnings while sophisticated investors do not, and that investors find value relevant information in goodwill impairments.
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