Date of Completion

Spring 5-1-2012

Thesis Advisor(s)

Robert Hoskin

Honors Major


Second Honors Major

Business Administration


Accounting | Business Law, Public Responsibility, and Ethics | Finance and Financial Management


This thesis explores how impairment charges driven by management assessment have led to the possibility of earnings management under the SFAS 142 standard. The goal of carrying out this research is to help the user understand the implications behind allowing management to judge impairment charges (US GAAP) versus pre SFAS 142 when intangibles such as a goodwill were amortized (currently IFRS).

How has SFAS 142 opened the door for earnings management? If there is evidence to prove this assumption, then what factors drive management's impairment decisions. This information is pertinent to investors when analyzing a potential investment as goodwill can often be a large amount for companies that grow inorganically. Giving management the ability to judge impairment has allowed more leeway in accounting for goodwill, begging the question of how impairment charges can change earnings, sizes of balance sheets and affect stock prices in the market. The user reading this paper will come to understand the accounting for goodwill under SFAS 142 which would allow them to explore at least some metrics that motivate a manager's actions.

By looking at how companies have taken goodwill write downs, analyzing how large they are, and exploring how management have assessed these impairments in the year of the adoption of SFAS 142 by FASB, the goal is to determine the drivers of management's decision in regards to their decision to impair or not impair their goodwill.