On the allocation of a takeover purchase price under AASB1013

Article

James, Kieran, How, Janice and Verhoeven, Peter. 2011. "On the allocation of a takeover purchase price under AASB1013." Asian Academy of Management Journal of Accounting and Finance. 7 (2), pp. 1-34.
Article Title

On the allocation of a takeover purchase price under AASB1013

ERA Journal ID40123
Article CategoryArticle
AuthorsJames, Kieran (Author), How, Janice (Author) and Verhoeven, Peter (Author)
EditorsAli, Ruhan
Journal TitleAsian Academy of Management Journal of Accounting and Finance
Journal Citation7 (2), pp. 1-34
Number of Pages34
Year2011
Place of PublicationPenang, Malaysia
ISSN1823-4992
1985-8299
Web Address (URL)http://web.usm.my/journal/aamjaf/vol%207-2-2011/7-2-1.pdf
Abstract

The purpose of this paper is to document and explain the allocation of takeover purchase price to identifiable intangible assets (IIAs), purchased goodwill, and/or target net tangible assets in an accounting environment unconstrained with respect to IIA accounting policy choice. Using a sample of Australian acquisitions during the unconstrained accounting environment from 1988 to 2004, we find the percentage allocation of purchase price to IIAs averaged 19.09%. The percentage allocation to IIAs is significantly positively related to return on assets and insignificantly related to leverage, contrary to opportunism. Efficiency suggests an explanation: profitable firms acquire and capitalise a higher percentage of IIAs in acquisitions. The target's investment opportunity set is significantly positively related to the percentage allocation to IIAs, consistent with information-signalling. The paper contributes to the accounting policy choice literature by showing how Australian firms make the one-off accounting policy choice in regards allocation of takeover purchase price (which is often a substantial dollar amount to) in an environment where accounting for IIAs was unconstrained.

Keywordspurchased goodwill; identifiable intangible assets; accounting policy choice; information signalling; opportunism
ANZSRC Field of Research 2020350103. Financial accounting
350704. Entrepreneurship
350101. Accounting theory and standards
Public Notes

Authors retain the following rights:... (iii) make any version of the Contribution available on digital repositories; provided in each case PENERBIT USM (and Publication) is cited as the first/forthcoming publisher of the Contribution and the Author(s) accurately distinguish any modified version of the Contribution from that published or to be published by PENERBIT USM.

Byline AffiliationsSchool of Accounting, Economics and Finance
Queensland University of Technology
Institution of OriginUniversity of Southern Queensland
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