Real Options, Enforcement of Goodwill/Intangibles Rules, and Associated Behavioral Issues
24 Pages Posted: 13 Dec 2013
Date Written: 2013
Abstract
While Real options Theory (ROT) has been touted as a viable alternative for valuing projects, the enforcement and efficiency of the Goodwill and Intangibles accounting regulations (ASC 850, Business Combinations, and ASC 350, Goodwill and Intangible Assets; IFRS-3R (Business Combinations) and IAS 38 Intangible Assets (accounting for Intangible Assets) raise several problems and psychological issues. These regulations are likely to increase the incidence of fraud and misconduct. The standard real options analysis framework is not entirely applicable to enforcement of, and litigation about Goodwill/Intangibles Regulations. This article also introduces new economic psychology theories that can explain fraud, misconduct and non-compliance that may arise from the implementation of these accounting rules.
Keywords: Fraud; Mergers & Acquisitions; Disclosure; Economic Psychology; Real Options; Evidence; Standards-of-Proof; Complexity; Intangibles/Goodwill
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