Will Goodwill Value in Indonesia Become More Relevant After IFRS Convergence?

Ersa Tri Wahyuni, Dewantoro Dewantoro, Ilya Avianti


This research aims to analyse the value relevance of goodwill in Indonesia before and after International Financial Report Standard (IFRS) convergence. Prior to the IFRS convergence period, goodwill should be amortised, while after the IFRS convergence the amortisation was prohibited and goodwill should be tested for impairment on annual basis. This research investigates goodwill among Indonesian listed companies in Kompas 100 index for the period 2009-2015. As many as 39 samples were selected for the period before the IFRS convergence and 56 samples were selected for the post-IFRS convergence period. Using panel data regression analysis the research finds that before the IFRS adoption, both goodwill and goodwill amortisation did not have significant value to the market value of the companies.  However goodwill has significant value to the market price of the companies after IFRS convergence (2011-2015), while goodwill impairment losses did not. However we found more companies recording impairment loss arround the adoption year (2011-2012) than the years afterward. We tested the significant of impairment loss around the year of adoption and the test shows goodwill impairment loss has significant value to the market price of the companies. Thus, the adoption of IFRS 3 which required goodwill impairment has improved the value relevance of goodwill. The adoption of IFRS 3 also encouraged the companies to impair their goodwill at the adoption year and immidiate year after. Impairment loss had been perceived positive by the investors which is shows by its positive correlation with the market price. This may indicate Indonesian investors appreciate the purification of goodwill number from hidden past impairment and anticipate the higher future Return on Asset.   


Value Relevance, Goodwill, Goodwill Impairment, Goodwill Amortization


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