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The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3

Tunyi Tunyi Abongeh, Dimu Ehalaiye, Ernest Gyapong, Collins G. Ntim

The International Journal of Accounting, Volume: 55, Issue: 02, Start page: 2050008

Swansea University Author: Tunyi Tunyi Abongeh

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DOI (Published version): 10.1142/s1094406020500080

Abstract

This paper examines the value of managerial discretion in financial reporting by exploring the value relevance of intangible assets acquired in business combinations (AIA) before and after the 2008 International Financial Reporting Standard (IFRS) 3 amendment. The 2008 IFRS 3 amendment gave managers...

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Published in: The International Journal of Accounting
ISSN: 1094-4060 2213-3933
Published: World Scientific Pub Co Pte Lt 2020
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URI: https://cronfa.swan.ac.uk/Record/cronfa65111
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first_indexed 2023-11-26T11:15:25Z
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spelling v2 65111 2023-11-26 The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3 eefe2792c8eed5b49feede33981dfa53 Tunyi Tunyi Abongeh Tunyi Tunyi Abongeh true false 2023-11-26 BAF This paper examines the value of managerial discretion in financial reporting by exploring the value relevance of intangible assets acquired in business combinations (AIA) before and after the 2008 International Financial Reporting Standard (IFRS) 3 amendment. The 2008 IFRS 3 amendment gave managers the discretion to recognize previously unrecognized intangibles in the target firm, hence, we posit that if managerial discretion improves the quality of financial reporting, we should observe an increase in the value relevance of AIA after the amendment. Our empirical analysis is based on a dataset of 603 mergers announced between 2004 and 2016, across seven African countries. Consistent with our main hypothesis, we find that the value relevance of AIA, predominantly acquired goodwill (AGW), increased after the amendment, suggesting that managerial discretion improves the quality of financial information. Our results further show that the value of discretion is moderated by the underlying institutional quality, with the value relevance of AIA being greater in high-quality institutional contexts. Our findings are robust to alternative measures of AIA, alternative models for testing value relevance, and various controls for endogeneity. Overall, our findings have important implications for accounting standard-setters, governments, investors, and practitioners. Journal Article The International Journal of Accounting 55 02 2050008 World Scientific Pub Co Pte Lt 1094-4060 2213-3933 Managerial discretion, IFRS 3, acquired intangible assets, business combinations, institutional quality, Africa 1 6 2020 2020-06-01 10.1142/s1094406020500080 http://dx.doi.org/10.1142/s1094406020500080 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University Not Required 2024-01-03T10:53:57.1284043 2023-11-26T11:12:58.5523438 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Tunyi Tunyi Abongeh 1 Dimu Ehalaiye 2 Ernest Gyapong 3 Collins G. Ntim 4
title The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3
spellingShingle The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3
Tunyi Tunyi Abongeh
title_short The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3
title_full The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3
title_fullStr The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3
title_full_unstemmed The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3
title_sort The Value of Discretion in Africa: Evidence from Acquired Intangible Assets Under IFRS 3
author_id_str_mv eefe2792c8eed5b49feede33981dfa53
author_id_fullname_str_mv eefe2792c8eed5b49feede33981dfa53_***_Tunyi Tunyi Abongeh
author Tunyi Tunyi Abongeh
author2 Tunyi Tunyi Abongeh
Dimu Ehalaiye
Ernest Gyapong
Collins G. Ntim
format Journal article
container_title The International Journal of Accounting
container_volume 55
container_issue 02
container_start_page 2050008
publishDate 2020
institution Swansea University
issn 1094-4060
2213-3933
doi_str_mv 10.1142/s1094406020500080
publisher World Scientific Pub Co Pte Lt
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1142/s1094406020500080
document_store_str 0
active_str 0
description This paper examines the value of managerial discretion in financial reporting by exploring the value relevance of intangible assets acquired in business combinations (AIA) before and after the 2008 International Financial Reporting Standard (IFRS) 3 amendment. The 2008 IFRS 3 amendment gave managers the discretion to recognize previously unrecognized intangibles in the target firm, hence, we posit that if managerial discretion improves the quality of financial reporting, we should observe an increase in the value relevance of AIA after the amendment. Our empirical analysis is based on a dataset of 603 mergers announced between 2004 and 2016, across seven African countries. Consistent with our main hypothesis, we find that the value relevance of AIA, predominantly acquired goodwill (AGW), increased after the amendment, suggesting that managerial discretion improves the quality of financial information. Our results further show that the value of discretion is moderated by the underlying institutional quality, with the value relevance of AIA being greater in high-quality institutional contexts. Our findings are robust to alternative measures of AIA, alternative models for testing value relevance, and various controls for endogeneity. Overall, our findings have important implications for accounting standard-setters, governments, investors, and practitioners.
published_date 2020-06-01T10:53:59Z
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score 11.016235

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