TREATMENT OF ACQUIRED GOODWILL AND EARNINGS MANAGEMENT: THE NIGERIAN BANKING SECTOR CONSOLIDATION EXPERIENCE
In line with the postulates of positive accounting theory, the study was carried out to check patterns of CEO discretion in treating acquired goodwill and earnings management in the post-Bank Consolidation era in Nigeria. The population of the study was the 25 banks that emerged after the consolidation process out of which a sample of 18 banks were selected judgementally. Different approaches were used to examine the reasons of the two bank procedures (those banks that write off goodwill through the profit and loss account and those that write off goodwill through the share premium account). The size of the bank, the type of compensation given to executives, the proportion of owner-directors on the board of directors, and the gearing ratio were all factors that were examined for their effect on employee motivation (leverage). Among the factors that were statistically significant, only the incentive based on profit percentage and the number of owner-directors differed between the two groups. The Study recommends a return to a rule-based approach in treating acquired goodwill [as already introduced for private firms in the USA] as there is too much discretion for earnings management in the impairment-only model.
Keywords: Acquired Goodwill, Earnings Management, Commercial Banks