Corporate governance and earnings management ... - CEREG

produce dramatically different financial statement results” [the pooling-of-interests method
and purchase method] (FASB, 2001b, Appendix 1, p. 5).
Bryer (1995, p. 304) also mentions the influence of capital markets, stating that “… the
motive for wanting to return to amortization [in the beginning of the 1990s] seems clear.
When the merger boom of the 1980s subsided, investors began to demand a return to
conventional goodwill accounting to allow them to observe the rate of return on capital”. In
our opinion, the capital markets’ influence is also reflected in the notion of international
pressure, or the desire for international comparability which is sometimes mentioned (Bryer,
1995, p. 305).
The growing role of the capital markets is also due to the ever increasing significance of
goodwill in corporate financial statements, as studied namely by Higson (1998).
Figure 1 below summarizes the results of our analysis on the influence of social forces on
accounting regulation for goodwill.
Insert figure 1 about here
3. The four historical phases of accounting for goodwill
The interaction (or “game”) between the four groups of social forces named above, which
will be discussed in more detail in the present section, resulted in changes in the regulations
affecting goodwill over the period examined. But, and this is what gives this article particular
relevance, the four countries studied went through the same phases but at different times.
Schematically, the history of goodwill since 1880 can be divided into four phases with the
recourse to a typology inspired by the traditional continental European theories of accounting
(Richard, 2005):
(1) The pure static phase (Richard, 1996, p. 31, 33): The term static (latin “stare”: to stop) is
used in order to describe an accounting theory which assumes that the balance sheet, for
the sake of protection of creditors, is to be valued on the basis of liquidative values
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