Tomas Hjelström

This paper provides evidence on the choices made by European firms when measuring non-controlling interest (NCI) and goodwill. Since 2009, IFRS 3 allows measurement of NCI either at fair value (full goodwill method) or at the proportionate share of net assets (partial goodwill method). IFRS 3 allows this policy choice on a per transaction basis. Our data comprise 188 hand-collected firm choices in connection with business combinations with remaining NCI, between 2010 and 2016. We use the theoretical framework developed by Stadler and Nobes (2014) explaining differences in firms' choices of overt accounting options by country, industry, and firm-specific topic factors. Based on univariate and multivariate analyses, we find that transaction-specific and firm-specific topic factors influence accounting policy choice, whereas country and industry factors do not. The choice has different effects on financial leverage and operating returns, which inform firm-level preferences. Regarding choices made at the transaction level, we find acquirers with an intention to buy additional shares from non-controlling shareholders tend to prefer the full goodwill method. Thus, the choice of accounting method conveys information to users about future additional acquisitions and has implications for standard setters, indicating that offering choices at transaction level may increase the forward-looking content of financial statements.

Different factors have contributed to the development of financial accounting in Sweden over time. The decades around the mid-1900s were characterized by creditor protection and accounting prudence, low transparency, and political influence through tax and corporate governance systems. This phase culminated in the 1970s, as illustrated by the Nobes (1983, p. 7) classification where Sweden was assigned to a class of its own at one of the extreme positions (characterized by prudence, tax and government influence, flexibility in use of provisions, etc.). A differentiation gradually took place from the 1980s and onward, where different accounting systems emerged for different entities. Swedish multinationals began to cross-list in the United States, and US GAAP reconciliations pointed at the need for consolidated financial statements prepared in accordance with high-quality standards. Accordingly, the International Accounting Standards (IASs) were gradually translated in 1990–2002 and adopted into Swedish GAAP for listed groups, followed by mandatory IFRS adoption in 2005 as Sweden had become a member of the European Union in 1995. However, legal-entity accounting developed differently; major efforts were made to develop a Swedish version of IFRS for SMEs, and the resulting standard (K3) has been in force since 2014. In addition to requiring IFRS to be applied by listed companies, Sweden today (2022) has one accounting system for consolidated financial statements in privately held groups (K3-consolidated), one system for large limited-liability legal entities (K3-legal entity), one system for small limited-liability legal entities (K2), and one system for sole proprietorships (K1). There are links between financial accounting and tax in the legal entities, where smaller firms are expected to benefit from more tax-aligned financial accounting systems (K1 and K2).

Stakeholders have questioned the effectiveness of the goodwill impairment-only approach, which was widely adopted in the early 2000s. Much empirical work has been conducted on the matter, but there is a need for more conceptual work. This paper applies goodwill-components theory to derive the theoretical objective of the goodwill impairment test and to define impairment effectiveness – a concept previously undefined but often referenced in the debate. Goodwill-components theory allows us to address the various components of goodwill instead of viewing accounting goodwill as homogeneous. Adopting this framework, we compare the current International Financial Reporting Standards (IFRS) model to two alternative impairment-only models, the pre-acquisition headroom (PH) model and the fair value (FV) model. We conclude that the PH model results in more effective impairment testing than the current IFRS model. Compared to the FV model, the PH model is more effective in the short run and less effective in the long run. Our analysis further identifies situations where the PH model is “over-effective”. The framework is also used to illustrate the effectiveness of the current IFRS model compared to a goodwill amortization model.

Den andra upplagan av Företagsvärdering med fundamental analys har genomgått en omfattande revidering för att spegla den utveckling som skett inom företagsvärderingsfältet med tydlig anpassning av redovisnings- och företagsvärderingsfrågor till dagens utmaningar. Boken utgår från den fundamentala analysen där en strategisk, redovisningsmässig, och finansiell analys ger förutsättningar för en väl grundad värderingsprocess.

Företagsvärdering med fundamental analys betonar användbarheten av värderingsansatserna och förståelse för behovet av en fundamental analys för att genomföra värderingar. Flera samtida exempel lyfts fram och inkluderat i boken finns även ett betydande övningsmaterial.

Med Excel-baserade hjälpmedel och en stegvis praktisk och teoretisk ansats tas steget från inlärning till handling vilket gör boken lämplig för såväl universitetsstuderande som praktiker.

This chapter presents the basics of the financial accounting system in sports organisations. It is based on an introduction to accounting terminology. The contents of financial reports and important interrelationships are then explained. This is done using the example of the “Dreaming Sports Club” in order to illustrate the basic contents and relationships in the accounting of sports organisations in a clear and easily comprehensible way. Based on this, the annual accounts of FC Barcelona are examined. Finally, some special features of sports organisations with regard to their effects on the financial reports are discussed.

In the Study on directors' duties and sustainable corporate governance prepared by EY Italy for the European Commission, dividend policies are used as a key indicator for financial short-termism. The study claims to identify short-termism among European companies and is set to be used as an empirical foundation for the Commission’s work towards a new regulation that is claimed to support long-term investments and greater sustainability. In this report, we scrutinize the claims of the study by examining potential signs of financial short-termism related to excessive dividend policies. Studying companies listed on the Swedish stock market, which has one of the largest market capitalizations within the EU as well as a vibrant IPO market, our dataset includes 786 unique firms and 7,389 firm-years during the years 2000-2019. Our empirical findings demonstrate that (1) 44 % of companies do not pay out a dividend, (2) the payout ratio of the firms depends on their life cycle, and (3) the firms with the highest dividend payout are also the firms with the highest profitability while at the same time performing well in terms of sustainability reporting and sustainability ratings. Thus, we see no material indications of financial short-termism in Sweden, and also caution against changing a well-functioning system (both in sustainability and financial terms).

We analyze executives' (CEOs, CFOs, and Board Chairpersons) personal tax returns to investigate whether and how their personal tax behavior is associated with the tax avoidance of their firms. We develop various measures of executives' personal tax behavior that are related to their personal risk propensity, ethics, financial incentives, and awareness of tax planning opportunities and risks. Our empirical results show that CEOs' and CFOs' personal tax behavior is related both to nonconforming and conforming corporate tax avoidance. We find no such results for Board Chairpersons.

In 2005, the International Financial Reporting Standards (IFRS) for goodwill accounting replaced the previously used two-component approach (i.e., goodwill amortization plus additional impairment when required) with an impairment-only approach. There has been renewed interest in this issue since the findings of the post-implementation review of IFRS 3. This paper develops a theoretical model of the initial and subsequent accounting for goodwill, that is usable for evaluating the relevance of different standard-setting solutions in this area. The model indicates that the current impairment-only approach creates a buffer that protects accounting goodwill from impairment. The buffer is created as a result of both internally generated core goodwill and the fair value of assets/liabilities not recognized on the statement of financial position. In turn, the impairment test will understate the economic loss and serve as a weak indicator of acquisition success/failure. Based on our model, we propose changing the impairment test procedure so that the same measurement and recognition criteria are employed as at initial recognition. Consequently, the representation of goodwill on the statement of financial position, and the effectiveness of goodwill impairment losses as an indicator, would improve.