Goodwill Amortization in the Italian Civil Code: Estimation Problems and a Methodological Proposal

Annalisa Baldissera

Authors

Annalisa Baldissera University of Brescia, Department of Law, Italy

Keywords:

Goodwill amortization, goodwill useful lifE, legal-economic analysis, Italian companies, Italian Civil Code

Abstract

In regulating the financial statements, the amortization of goodwill represents a complex problem that requires a careful assessment of the economic conditions of the firm and their foreseeable evolution. This study aims to analyze the topic with specific regard to the Italian context, in order to identify the parameters useful for guiding the amortization processes, in compliance with the limits set by the legislation on financial statements. To this end, the study used a methodology based on the legal-economic analysis of the evolution of Italian legislation from 1882 to today and its effects on the economic valuations implied by amortization. The results show that the accounting for goodwill has changed over time, being characterized in the first phase by the prevalence of conservative accounting and by the consequent need to amortize goodwill in the shortest possible time. Subsequently, the accrual basis prevailed over conservatism, and today the basic rule is represented by the useful life of goodwill. The originality of this study lies in the multidisciplinary approach which, by combining the economic interpretation of the company with the legal rules on reporting, proposes an analysis model applicable in the practice of companies that prepare their financial statements according to the Civil Code.

References

Amaduzzi, A. (1963). L’azienda nel suo sistema e nell’ordine delle

sue rilevazioni. Second Edition. Torino: Utet.

Amodeo, D. (1951). Note sulla tecnica e la politica

dell’ammortamento, Napoli: Giannini.

Amodeo, D. (1965). Ragioneria generale delle imprese. Second

Edition. Napoli: Giannini.

Ardemani, E. (1958). L’avviamento dell’impresa. Milano: Marzorati.

Bédard, J., & Gendron, Y. (2010). Strengthening the financial

reporting system: can audit committees deliver?. International

journal of auditing, 14(2), 174-210.

Bloom, M. (2009). Accounting for goodwill. Abacus, 45(3), 379-389.

https://doi.org/10.1111/j.1467-6281.2009.00295.x.

Bushman, R. M., & Piotroski, J. D. (2006). Financial reporting

incentives for conservative accounting: The influence of legal and

political institutions. Journal of accounting and economics, 42(1-2),

-148. https://doi.org/10.1016/j.jacceco.2005.10.005.

Caratozzolo, M. (2006). Il bilancio d’esercizio. Milano: Giuffrè.

Cassandro, P. E. (1950). L’incidenza dei fattori produttivi a lungo

termine sul risultato economico di periodo. Bari: Cacucci.

Churyk, N. T., & Chewning Jr, E. G. (2003). Goodwill and

amortization: Are they value relevant?. Academy of Accounting and

Financial Studies Journal, 7(2), 57-69.

Colley, J. R., & Volkan, A. G. (1988). Accounting for

goodwill. Accounting Horizons, 2(1), 35-41.

De Gobbis, F. (1931). Il bilancio delle società anonime. Second

Edition. Milano: Società Anonima Editrice Dante Alighieri.

De Gobbis, F. (1935). Le nuove proposte di riforma del codice di

commercio riguardanti i bilanci delle società anonime: lezione tenuta

il 4 giugno 1935-XIII dal Prof. Francesco De Gobbis per la chiusura

del suo corso di Ragioneria. Torino: Stabilimento Tipografico

Villarboito.

Ding, Y., Richard, J., & Stolowy, H. (2008). Towards an

understanding of the phases of goodwill accounting in four Western

capitalist countries: From stakeholder model to shareholder

model. Accounting, organizations and society, 33(7-8), 718-755.

https://doi.org/10.1016/j.aos.2007.07.002.

Duvall, L., Jennings, R., Robinson, J., & Thompson II, R. B. (1992).

Can investors unravel the effects of goodwill

accounting?. Accounting Horizons, 6(2), 1.

Escaffre, L., & Sefsaf, R. (2010). French market reaction to the

announcement of goodwill impairment. Working paper. University of

Angers.

Ferramosca, S., & Allegrini, M. (2021). Impairment or amortization

of goodwill? An analysis of CFO Perceptions of Goodwill

Accounting. European Management Journal, 39(6), 816-828.

https://doi.org/10.1016/j.emj.2021.03.001.

Garcia, C., Katsuo, Y., & van Mourik, C. (2018). Goodwill

accounting standards in the united kingdom, the United States,

France, and Japan. Accounting History, 23(3), 314-337.

https://doi.org/10.1177/1032373217748672.

Hall, S. C. (1993). Determinants of goodwill amortization

period. Journal of Business Finance & Accounting, 20(4), 613-621.

https://doi.org/10.1111/j.1468-5957.1993.tb00279.x.

Henning, S. L., & Shaw, W. H. (2003). Is the selection of the

amortization period for goodwill a strategic choice?. Review of

Quantitative Finance and Accounting, 20(4), 315-333.

https://doi.org/10.1023/A:1024043316292.

Jahmani, Y., Dowling, W. A., & Torres, P. D. (2010). Goodwill

impairment: A new window for earnings management?. Journal of

Business & Economics Research (JBER), 8(2).

https://doi.org/10.19030/jber.v8i2.669.

Jennings, R., LeClere, M., & Thompson, R. B. (2001). Goodwill

amortization and the usefulness of earnings. Financial Analysts

Journal, 57(5), 20-28. https://doi.org/10.2469/faj.v57.n5.2478.

Kothari, S. P. (2000, June). The role of financial reporting in

reducing financial risks in the market. In Conference Series-Federal

Reserve Bank of Boston (Vol. 44, pp. 89-102). Federal Reserve Bank

of Boston; 1998

Li, Z., Shroff, P. K., Venkataraman, R., & Zhang, I. X. (2011).

Causes and consequences of goodwill impairment losses. Review of

accounting studies, 16(4), 745-778. https://doi.org/10.1007/s11142-

-9167-2.

Masini, C. (1947). L’economia delle imprese industriali di medie

dimensioni nelle rilevazioni di azienda. Milano: Giuffrè.

Massoud, M. F., & Raiborn, C. A. (2003). Accounting for goodwill:

are we better off?. Review of business, 24(2), 26-32.

Ratiu, R. V., & Tudor, A. T. (2013). The theoretical foundation of

goodwill-a chronological overview. Procedia-Social and Behavioral

Sciences, 92, 784-788. https://doi.org/10.1016/j.sbspro.2013.08.755.

Schatt, A., Doukakis, L., Bessieux-Ollier, C., & Walliser, E. (2016).

Do goodwill impairments by European firms provide useful

information to investors?. Accounting in Europe, 13(3), 307-327.

https://doi.org/10.1080/17449480.2016.1254348.

Shahwan, Y. (2011). Review of accounting for goodwill: Historical

to current perspectives. Corporate Ownership and Control, 8(3), 233-

Waxman, R. N. (2001). Goodwill convergence. The CPA

Journal, 71(10), 18-24.

Zappa, G. (1910). Le valutazioni di bilancio con particolare riguardo

ai bilanci delle società per azioni. Milano: Soc. An. Istituto

Editoriale Scientifico.

Zappa, G. (1920-1929). La determinazione del reddito nelle imprese

commerciali. I valori di conto in relazione alla formazione dei

bilanci. Roma: Anonima Libraria Italiana.

Goodwill Amortization in the Italian Civil Code: Estimation Problems and a Methodological Proposal

Authors

Keywords:

Abstract

References

Downloads

Published

How to Cite

Issue

Section

License