Quality of Performance Measurement Systems of Intangibles and Goodwill Impairment Losses

The paper aims at unwinding the methodological challenges underlying the measurement and communication of goodwill impairment loss in relation to the implementation of fair value accounting. Deviating from a pure agency theory of the interpretation of the timing of the goodwill impairment losses measurement and communication, we suggest an organizational interpretation of goodwill impairment losses. We hypothesize that delay in reporting goodwill impairment losses can be driven by the lack of quality of performance measurement systems of intangible assets, and more specifically by the lack of quality of monitoring, of target setting and of external communication of intangible assets. We conducted the analysis on a sample of global listed companies whose Book to Market value was equal or greater than one in the period 2008-2012. Finding suggests that the quality of performance measurement systems of intangible assets monitoring, and target setting matters in explaining the likelihood of delaying the recognition of the goodwill impairment losses. Results hold in the presence of a number of control variables.