An examination of goodwill impairment testing in Singapore

The aim of this thesis is to contemplate the degree to which Singaporean firms comply with the highly technical disclosure requirements under FRS 36 specific to goodwill impairment testing between the years 2005 to 2007. It is also aims to explain why some firms find the implementation of goodwill impairment testing difficult. Singapore is chosen because of its advanced and economically significant economy in the heart of Asia, with a highly skilled professional workforce and strong institutional and financial infrastructure to support quality financial reporting. This thesis examined 168 firms reporting goodwill in three consecutive years, to establish compliance and disclosure quality post-transition. Data from multiple years, rather than a single year, are used in this thesis to test the consistency of the results. The thesis found that there was a slight improvement in the rate of compliance with this requirement over the period of the study. A significant Friedman test implies that the change was significant and it implies that the development is statistically significant. Findings indicated that compliance level and disclosure quality, although better than prior studies would have suggested, is still sporadic and unpredictable. However, the overall results of the analysis in this thesis suggest that in the majority of cases the level of compliance and disclosure quality of compliance among the Singaporean listed firms is low. This is particularly so for the cash-generating unit (CGU) definition and goodwill allocation, and key input variables used in estimating CGU recoverable amounts (especially on discount rates selection). The thesis also found no significant difference in audit quality, regardless of whether the audit was undertaken by Big Four or non-Big Four auditors. The Chi-square test for independence indicated no significant association between the types of auditors and the compliance level and disclosure quality. Based on these results, the majority of Singaporean firms face a high degree of difficulty in the translation from idea to action in implementing the requirements of the standard. Further, questions are raised about the quality of accounting information among goodwill-intensive firms in Singapore and the robustness of regulatory oversight institutions operating within Singapore.