Goodwill accounting: A critical evaluation of evolving international standards and implications for financial reporting

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Abstract

The accounting treatment of goodwill has been the subject of extensive discussion and disagreement among standard setters and financial statement preparers in the nations. There have been significant challenges in defining, measuring, and subsequently accounting for goodwill, especially when the accounting treatment depends on cultural issues, amongst others (Khlif, 2016). Nonetheless, goodwill remains a substantial asset in many companies, its preservation and value upheld through substantial annual expenditure. In Europe, accounting for goodwill has undergone numerous changes due to the combined impact of new international accounting standards, namely International Financial Reporting Standard (IFRS) 3 on Business Combinations, and International Accounting Standard (IAS) 36 on Impairment of Assets. This paper critically evaluates, drawing from accounting literature, the shift in goodwill accounting treatment following IFRS. It assesses and contrasts the previous policies with the new IFRS policies for goodwill accounting, presenting the benefits and drawbacks approach to goodwill. Providing an exhaustive review of the literature on goodwill accounting, this study holds implications for financial statement preparers and users by elucidating conceptual issues pertinent to the implementation of the impairment-only approach to goodwill.

Keywords: Goodwill, Intangible Assets, International Accounting Standards

Authors’ individual contribution: Conceptualization — K.L.; Visualization — K.L.; Investigation — K.L.; Writing — Original Draft — V.B. and P.B.; Writing — Review & Editing — P.B. and A.H.; Supervision — A.H.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G32, E22, M41

Received: 21.01.2025
Revised: 30.03.2025; 25.06.2025
Accepted: 21.07.2025
Published online: 24.07.2025

How to cite this paper: Lampiris, K., Balla, V., Ballas, P., & Hyz, A. (2025). Goodwill accounting: A critical evaluation of evolving international standards and implications for financial reporting. Risk Governance & Control: Financial Markets & Institutions, 15(3), 94–102. https://doi.org/10.22495/rgcv15i3p7