This study presents some evidence of discount rate selection on goodwill impairment testing under the new requirements of FRS 36. The selection of discount rates is believed to be an important key factor that affects the outcome of impairment assessment, especially when using the method of value in use. This study objectively examines the Singapore listed firm’s selection of discount rates disclosed, and then tests and compares the variation between discount rates disclosed by firms for the goodwill impairment testing with independently generated estimates of firm specific risk adjusted discount rates for multi year samples of 2007, 2006 and 2005. In order to achieve the objective of this study, the Capital Asset Pricing Model (CAPM) is chosen because it describes the relationship between risk and expected return and that is used in the pricing of risky securities. For the purposes of this paper, the final research sample consists of 142, 127 and 86 firms that employed the value in use method in goodwill impairment testing and defined only a single discount rate in 2007, 2006 and 2005 respectively. The results show most of the firms understated their discount rates for 2005, while in 2006 and 2007 some firms over-stated their discount rate when compared with an independently estimated risk adjusted discount rate. The results also indicate that the Singapore listed firms have difficulties in the discount rates disclosure which may in turn limit the decision usefulness of their financial disclosures by potentially diluting the robustness of the impairment testing.

This study sets out to offer proof of several important questions relating to the quality of information disclosed on goodwill impairment process under the new requirements of FRS 36. This study investigates the compliance level and disclosure quality of FRS 36 by top 20 of Singaporean listed firms in SGX at 2007 based on their market capitalization. In order to achieve the objective of this study, the weighted index is chosen because this index being able to differentiate the quality and importance of each mandatory disclosure under FRS 36. The weighted index was developed by constructing disclosure scoring sheet, obtaining annual reports of 20 sampled Singapore firms for particular year, completing scoring sheet for each firms by assigned weighted for the disclosure items and calculating disclosure weighted index. The weighted index was analyzed to examine the firm’s compliance with the FRS 36 disclosure requirements. The results of this study revealed that 18 out of 20 (90%) firms in Singapore failed to comply with the most basic elements of the FRS 36 pertaining to goodwill impairment testing especially in allocating goodwill into the CGUs and key assumptions used in determining the recoverable amount of CGU assets. Keywords: Impairment Testing, FRS 36, Weighted Index, Singapore.