Honors Theses
Date of Award
2009
Document Type
Undergraduate Thesis
Department
Accountancy
First Advisor
Rick Elam
Relational Format
Dissertation/Thesis
Abstract
The purpose of this study is to determine both the long-term and short-term effects of negative goodwill- the result of acquiring a company for less than its fair valueupon the acquiring company in a business combination, researcher hypothesizes that while the new accounting standard of SFAS 141R will make acquiring companies more attractive to stakeholders in the year of acquisition, the long term effects of acquiring negative goodwill will be detrimental to the company's long-term success, as there has to be some reason that a company would be sold for less The than it is worth. The study takes into account the short-term effects of a new accounting standard and also examines long-term company performance in trying to determine whether a company that acquires negative goodwill is likely to perform poorly on a long-term basis. The research is done by obtaining year-end financial reports for selected companies that have engaged in transactions involving negative goodwill and calculating their financial ratios in order to analyze their performance. The financial ratios. which are tools commonly used in evaluating a company's performance, are calculated for both the old accounting standard as well as the new standard in order to determine 11 the effects of the new standard. The long-term effects of negative goodwill are studied by researching the return performance of some of the purchasing companies' stocks, assuming that the theory of semistrong market efficiency is The research hypothesizes that the information about the companies that is made publicly available, such as the existence of negative goodwill, will have an effect on the This idea that the true. performance of the companies' stocks, publicly available information regarding the company will affect its stocks is the central idea behind the semistrong market efficiency.
Recommended Citation
Sights, Jere Matthews, "Accounting for Negative Goodwill Arising from Business Combinations" (2009). Honors Theses. 2119.
https://egrove.olemiss.edu/hon_thesis/2119
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