Corporate governance and earnings management ... - CEREG

(Hirschfeld, 1959). Goodwill was a “unique organic item” (ruling of September 30, 1931)
(quoted in Greve, 1933, p. 80). Mörschel (1933, p. 48) believed that this theory was a screen
to hide more prosaic arguments: the tax administration already allowed secret reserves in the
form of rapid depreciation of machines, and wanted to protect its fiscal revenues by
preventing amortization of goodwill. Whether theoretical or pragmatic, this argument failed to
convince the commercial world who generally does not considered goodwill, when it was
capitalized, as a true asset but only as a means to reduce the indebtedness (Dziadkowski,
1980, p. 1515, quoted by Söffing, 1988, p. 597-599).
3.1.4. France: the static phase (1880 - 1917)
In terms of both doctrine and case law, the static phase in France was dominated by the
purely static approach: goodwill was not considered a true asset and was to be expensed
immediately, or at the very least rapidly.
a) Doctrine
In the 1880s, the authors of the first chart of accounts such as Didier (1885) with his “strict”
balance sheet, Courcelle-Seneueil (1872) and Vavasseur (1868), who stressed the difficulty of
realizing fixed assets (in Verley, 1906, p. 121), recommended that assets, including goodwill,
should be carried at liquidation value. To this way of thinking, a “good” asset is one with
totally amortized goodwill.
In the 1900s, most authors also insist that acquired goodwill is not a real asset. While they
accept recognition of this “fictitious” asset, rapid amortization (generally total amortization
within less than five years) or a similar solution is required.
Kopf (1904, p. 27) is in favor of “management based on the assumption that a company
will be liquidated”, and considers that it is “prudent to amortize patents rapidly” (and by
implication customer bases, which he puts on the same level).
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