Audit Fees under Alternative Goodwill Accounting Approaches : Evidence from the Adoption of the Impairment-Only Approach in Australia

The International Accounting Standards Board (IASB) constituents expressed concerns about the cost of the impairment-only approach for goodwill accounting under International Financial Reporting Standards (IFRSs). Considering these concerns, the IASB is now reviewing the approach. Motivated by this debate, we examine the association between goodwill and audit fee under two alternative goodwill accounting approaches in Australia – the dual approach under pre-IFRSs Australian Generally Accepted Accounting Principles and the impairment-only approach under IFRSs. We find that goodwill does not have an audit fee-increasing impact under the impairment-only approach than under the dual approach. This result is robust across alternative variable measurements, alternative samples and alternative models. The result is of potential interest to the IASB and its constituents