Should the cost of capital, used in connection with goodwill impairment testing, vary across countries?
Publication date: 1 July 2020
Abstract
Learning outcomes
Through the discussion of this case, students will have better understanding of the conceptual stakes related to accounting treatment for goodwill and factors determining goodwill impairment testing. The case also discusses the determination of the cost of capital and the impact of taking into account certain factors related to country risk for determining the discount rate in an international framework.
Case overview/synopsis
Greenfields Company continues to expand through acquisitions in emerging markets. The company aims to overcome the complexity of measuring goodwill subsequent to the initial recognition. The case was written to illustrate challenges of estimating the appropriate discount rate to be used in the goodwill impairment testing as investments in emerging countries give rise to many discount rate measurement problems such as the availability of statistical data and the risk assessment to be considered.
Complexity academic level
The case can be used at undergraduate or postgraduate level and it requires fundamental knowledge in accounting and corporate finance.
Supplementary materials
Teaching Notes are available for educators only.
Subject code
CSS 1: Accounting and Finance.
Keywords
Acknowledgements
Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognisable information to protect confidentiality.
Citation
Salameh, E. (2020), "Should the cost of capital, used in connection with goodwill impairment testing, vary across countries?", , Vol. 10 No. 2. https://doi.org/10.1108/EEMCS-01-2020-0019
Publisher
:Emerald Publishing Limited
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