Discretion in the application of the goodwill impairment test in European banks

In the absence of amortization of goodwill, the purpose of this study is to identify whether the impairment test was applied uniformly between 2005 and 2015 at the 45 biggest banks in Europe, during the first decade of IFRS application. Likewise, an attempt has been made to verify whether such application has been insufficient and late. Through a significant sample, statistical tools already widely used in other studies have been applied to contrast the behavior of entities. The results obtained show that impairment policies have been applied unevenly in each of the countries. These conclusions could support the return to a valuation pattern that takes into account the systematic amortization of goodwill, apart from its impairment. This paper reveals how impairment in European banks has been recognized during a crucial period of time that includes a major financial crisis. The study suggests a discretionary and opportunistic implementation of accounting regulations which does not reveal the economic conditions inherent to the financial activity of the leading European banks, making comparability difficult and, ultimately, making the financial information less relevant.