This fall, CEIBS Accounting Professor Yuan Ding’s latest article, on the topic of "goodwill accounting," has been accepted for publication in the prestigious academic journal Accounting, Organizations and Society. Co-authored by professors Jacques Richard of the University of Paris-Dauphine and Herve Stolowy of the HEC School of Management, the paper is entitled: "Understanding the phases of goodwill accounting in four Western capitalist countries: from a stakeholder model to a shareholder model." It illustrates the impact of a change in shareholders’ attitude -- from a stakeholder model to a shareholder model - on goodwill accounting (a firm’s accounting treatment of goodwill).

The authors studied four Western countries - Great Britain, the United States, Germany and France - each of which has undergone what they refer to as "four identified phases of goodwill accounting."

The resulting study, the authors say, adds valuable new information to existing research because it is international and comparative and spans more than 100 years (starting from 1880). In addition, the study uses the stakeholder/shareholder model to explain the evolution in goodwill treatment in the four nations studied. In other words, the study distinguishes four phases in accounting treatment of goodwill, classified as (1) "static" (immediate or rapid expensing), (2) "weakened static" (write-off against equity), (3) "dynamic" (recognition with amortization over a long period) and (4) "actuarial" (recognition without amortization but with impairment if necessary) - a process that tends to trigger firms to show a preference for short-term rather than long-term profit.

In addition, the study’s findings support the argument that accounting rules can add momentum to the general trend towards the shareholder model. Lastly, the study demonstrates what the authors call a "one way" evolution of goodwill treatment in the countries studied - all toward the actuarial phase.