Differences in the Value Relevance of Identifiable Intangible Assets

56 Pages Posted: 19 Aug 2019 Last revised: 26 Aug 2021

See all articles by Zachary King

Zachary King

University of Wisconsin-Madison

Thomas Linsmeier

University of Wisconsin-Madison

Daniel Wangerin

Wisconsin School of Business

Date Written: August 26, 2021

Abstract

Motivated by investor criticisms of current accounting policy, this study investigates whether differences exist in how acquired identifiable intangible assets relate to investors’ expectations about the entity’s future cash flow prospects. Some investors assert that all acquired intangibles should be subsumed within goodwill; while others call for separate recognition from goodwill only when identifiable intangibles are separable from the business, have defined useful lives, and have identifiable revenue streams (i.e., “wasting” intangibles). Still other investors prefer separate recognition of identifiable intangibles only when they are strategically important sources of future cash flows. Consistent with some investor views, we find cross-sectional variation in value relevance based on differences in underlying asset characteristics. Our primary findings suggest that separate recognition of strategically important wasting intangibles provides information different from that provided by goodwill, and that there is no loss of value relevant information if other intangibles are subsumed in goodwill.

Keywords: mergers and acquisitions, intangible assets, purchase price allocations, goodwill

JEL Classification: D82, G34, M41

Suggested Citation

King, Zachary and Linsmeier, Thomas and Wangerin, Daniel D., Differences in the Value Relevance of Identifiable Intangible Assets (August 26, 2021). Available at SSRN: https://ssrn.com/abstract=3438250 or http://dx.doi.org/10.2139/ssrn.3438250

Zachary King (Contact Author)

University of Wisconsin-Madison ( email )

Madison, WI
United States

HOME PAGE: http://wsb.wisc.edu/directory/students/phd/students/zachary-king

Thomas Linsmeier

University of Wisconsin-Madison ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Daniel D. Wangerin

Wisconsin School of Business ( email )

975 University Avenue
4104 Grainger Hall
Madison, WI 53706
United States

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
464
Abstract Views
2,717
rank
85,715
PlumX Metrics