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Contribution Details
| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | Are Discount Rates Used for Goodwill Impairment Tests Consistent with Banks' Perfomance? |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Date | 2020 |
| Abstract Text | This thesis investigates if the 25 largest banks applying IFRS determine their discount rates used for goodwill impairment tests in a consistent manner. On the one hand, banks must earn their cost of capital. On the other hand, discount rates are used to determine the present value of strategic investments, such as goodwill. The corresponding IFRS standard requires the use of WACC as a reference. The developed multivariate regression model includes WACC, ROE, stock performance and the ratio of goodwill to equity in order to explain the changes in annual discount rates. The analysis illustrates little correlation between explanatory variables and the applied discount rates, as well as a mostly insignificant model itself. The results are also limited by the large subjectivity the corresponding standard provides, missing data, a small sample size and potential estimation errors. |
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