alexa Accounting for Goodwill and Manipulation
ISSN: 2168-9601

Journal of Accounting & Marketing
Open Access

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Research Article

Accounting for Goodwill and Manipulation

Takefumi Ueno1*, Genki Sakakibara2 and Sanshiro Uchino3

1Faculty of Management and Information Department, University of Shizuoka, Japan

2Shizuoka Bank, Shizuoka, Japan

3Graduate Schools of Management and Information of Innovation, University of Shizuoka, Japan

*Corresponding Asuthor:
Takefumi Ueno
Faculty of Management and Information Department University of Shizuoka
Tel: 054-264-524
[email protected]

Received date: May 26, 2015; Accepted date: June 19, 2015; Published date: June 25, 2015

Citation: Ueno T, Sakakibara G, Uchino S (2015) Accounting for Goodwill and Manipulation. J Account Mark 4:131. doi:10.4172/2168-9601.1000131

Copyright: © 2015 Ueno T, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.



We explored some links between earnings management and accounting fraud. Most previous studies ignored the connections between earnings management and accounting fraud. This study attempted to find the linkage between them by exploring some cases. In particular, we focused on M&A deals. Accounting for acquired goodwill has been subject to considerable debate for at least the past 50 years because the accounting tends to provide managers with discretion to manipulate accounting figures. The European Securities and Markets Authority (ESMA) reported that overall impairment losses on goodwill amounted to only €40 billion from the €790 billion of goodwill in spite of the EU sovereign debt crisis in 2011. This showed that managers tended to intentionally avoid impairments losses. Goodwill accounting gives managers opportunities to manipulate accounting figures. This study used two case studies to explore the accounting manipulation through M&A transactions. The first case is the scandal of Olympus Corporation (Olympus) which is one of the most famous accounting fraud. Olympus had hidden more than $1.5 billion of investment losses through M&A transactions until the scandal exposure in 2011. The second case is the unintentional mismanagement by HP. HP recorded $8.8 billion of the impairment loss of goodwill after the detection of Autonomy’s fraud. The boundary between earnings management and accounting fraud is unclear. Managers have a broad discretion into the accounting for goodwill. This would lead to a high possibility that many companies poorly comply with the requirements of accounting.


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