Corporate governance and earnings management ... - CEREG

5. Conclusion
Our article sets out to study the evolution of accounting for goodwill in four countries,
Great Britain, the USA, Germany and France, and over a period of more than one century. We
show that at the outset these four countries were in an identical position, with a static vision of
accounting for goodwill, and that they are currently converging towards a similar phase using
the actuarial approach (recognition and impairment testing). Interestingly, the actuarial view,
which is in the process of becoming the dominant practice, was already in existence in the
1900s.
We have attempted to explain this evolution with reference to the social nature of
accounting. Four groups of social forces were identified: lawyers, bankers, tax administrations
and the capital markets. While lawyers were the most dominant social forces at the start of the
period covered by our study, capital markets are obviously the major influential forces of our
own time. The tax administration’s role varies according to the country: it is a major player in
France but a minor player in the United States, where tax and financial reporting are
independent of each other. The tax administration’s influence can also be considered inversely
proportional to the influence of consolidated financial statements. In the United States, the
first country to invent consolidated financial statements, the influence of taxation has been
consistently low. The US model was therefore the first to feel the need to change the old
system (expensing or charging to reserves), then the first to adopt amortization, then
impairment testing. The lawyers and creditors have lost power to the shareholders, who are
demanding faster and faster reactions and results. Unlike Nobes (1992), who refers to the
image of a cycle in accounting regulation, and unlike Mattessich (1992) and Saghroun and
Simon (1999), who introduce the principle of a pendulum, we show a “one-way” evolution of
accounting regulation on goodwill in the four studied countries towards the actuarial phase,
which is totally different from the initial phase, the static approach.
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