Goodwill under IFRS: Relevance and disclosures in an unfavorable environment

• The purpose of this study is to enrich the ongoing debate upon the accounting treatment of purchased goodwill under IFRS.
• We attempt to draw attention to the market valuation implications of goodwill under IFRS in a country outside the Anglo-Saxon accounting paradigm.
• We examine the value relevance of purchased goodwill by employing an adaptation of Ohlson's (1995) model.
• We find that goodwill is value relevant even though Greece is regarded as unfavorable environment for the application of IFRS.
• Our results indicate that companies that fail to comply with the disclosure requirements of IFRS suffer non-relevance of their purchased goodwill.

The accounting treatment of purchased goodwill under IFRS has been severely criticized due to the extensive use of fair value accounting. The purpose of this study is to enrich the ongoing debate upon this issue by drawing attention to the market valuation implications of goodwill in a country outside the Anglo-Saxon accounting paradigm, where the application of fair value accounting has been seen as more problematic. The results indicate that, in the case of purchased goodwill, fair value accounting generates relevant accounting numbers but only in companies that comply highly with IFRS disclosure requirements.