Isser's Difficulties in Applying Accounting Practices Regarding Goodwill and Impairment

Jakob Maahn Kjærgaard & Christian Dons Haugaard

Student thesis: Master thesis


This Master thesis is written in connection with the conclusion of the Master study of auditing and accounting at Copenhagen Business School. The thesis aims to describe the requirements for issuers of financial statements in regard to recognition, measurement and disclosures related to goodwill and impairments. Hereafter the thesis elaborates on the requirements of auditors performing independent audits of the aforementioned financial statements, specifically concerning goodwill and impairments.
The thesis analyses reports issued by ESMA, decrees issued by Danish public regulators as well as statements issued by regulators regarding goodwill and impairment disclosures, and accounting practices. This analysis shows the issues faced by issuers of financial statements.
The thesis goes on to analyse the current, specific, situation of goodwill and impairment disclosures in financial statements issued by the companies in the OMX C20-CAP. The analysis is performed through qualitative com- parison to the requirements according to IAS 36, to “the good example” according to recognition and awards given by the Danish Association of State Authorised Public Accountants in 2015 as well as decrees from Danish enforcers of financial review. The analysis shows that there, quite clearly, is some way to go before issuers of financial statements are in full compliance with IAS 36, and stakeholders are given the full picture of goodwill and impairments hereof. In the thesis, a further analysis of the future roll of the independent auditor concerning especially disclosures regarding goodwill and impairments has been undertaken. The analysis of the independent auditor’s roll has taken into consideration the impact of forthcoming EU-legislation as well as to-be-implemented International Standards of Auditing and not least, the requirement to stay independent.
Based on these analyses, it is expected that especially the implementation of Key Audit Matters in the Auditor’s Report on the financial statements can lead to an increased and improved dialogue between the independent auditor, and the Audit Committee in Denmark. This increased dialogue, in turn, is expected to lead to an im- provement in disclosures, increasing value for stakeholders. The fact that goodwill and impairment in its nature almost certainly will be a Key Audit Matter, can also increase discussions hereof and possibly increase transpar- ency given that the independent auditor must elaborate on the audit hereof. For the Key Audit Matters, it is imperative that they do not become “boilerplate” wordings, and instead are specific for the individual companies in question.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2016
Number of pages128