Lecture 5:Huikku, Jari, Mouritsen, Jan and Silvola, Hanna (2017). Relative reliability and the recognisable firm: Calculating goodwill impairment value

Question 1

What is the paper investigating?

Answer 1

How financial accounting is produced by studying goodwill impairment tests (IAS 36). By investigating “traces” and how they often are found beyond the company infrastructure of sheets of accounts and financial ledgers.

Question 2

What is the aim?

Answer 2

To investigate how accounting standards are translated into accounting practices, and to investigate how this is reliable.

Question 3

What are the contributions?

Answer 3

1. Financial accounting is a process of finding, qualifying, stabilizing and calculating traces that often have to be found beyond the company infrastructure of sheets of accounts and financial ledgers.
2. It shows that traces increase reliability when they are recognisable and impersonal. No single person is responsible for the financial calculation and the trances used assume that a firm cannot outperform the broader economy or history of the firm.

Question 4

Why is it important to investigate the production of accounting?

Answer 4

1. As a construction, financial accounting is easy to change because it is mathematical, and therefore easy to manipulate by changing calculations to their benefit (earnings management)
2. Accounting is in the hands of few who can design it to suit their own interest. (Ofc there is a limit, the more personal financial accounting is, less reliable it will be. (no trust)).

Therefore, important to investigate how the accounting construction differs from a personal statement.

Question 5

What does the author mean with that reliability is relative?

Answer 5

1. Reliability is relative “to the degree of recognisability and impersonality of traces”
2. IFRS has increased the boundaries of calculations
3. Nobody knows what a calculation of goodwill impairment contains before it is challenged. There is a potential of endless possibilities of traces.