Section Article

Demonstrate Australias adherence to IFRS requirements for the disclosure of goodwill impairment testing by presenting supporting evidence.
Author(s): Prakash Verma

Abstract
The adoption of the International Financial Reporting Standards (A-IFRS) has resulted in substantial changes to the accounting and reporting system for goodwill in Australia. The implementation of the impairment testing-driven method for reporting goodwill as mandated by A-IFRS results in a distinct approach to valuing goodwill for the balance sheet. It also affects the manner and timing in which goodwill as an asset category impacts the calculation of periodic profit. One may argue that the adoption of A-IFRS goodwill accounting and reporting also leads to a substantial rise in complexity. This holds true for the prescribed techniques for reporting companies to utilise when accounting for goodwill as well as the specific disclosures needed about goodwill and its impairment. From this it seems that corporations making their first reports under the new system may exhibit varying levels of disclosure quality and unequal compliance with the laws. The objective of this paper is to examine the level of adherence to various provisions of AASB 136 - Impairment of Assets as well as the adequacy of disclosure in accordance with that standard. This is achieved by examining the financial statements of fifty prominent Australian companies that were publicly traded in 2006. Significant levels of noncompliance were found along with a notable variation in the quality and accuracy of impairment testing disclosures. The text discusses and identifies potential avenues for further research as well as provides recommendations for particular policy.