COMMUNICATING UNCERTAINTY IN FINANCIAL STATEMENT NARRATIVES: GOODWILL IMPAIRMENT TESTING

The goal of this paper is to determine how uncertainty can be communicated in the notes to financial statements. We focus on narrative disclosures in a setting of high uncertainty: disclosures concerning the results of goodwill impairment tests. The data come from Polish companies characterised by high uncertainty relative to the main markets of the European Union or the USA. We use qualitative methods, interviews and content analysis, and we draw on the genre theory to understand how the narratives are formed and why. We find that uncertainty is not communicated directly, because it would be against the rules of the genre. In cases where significant doubts concerning the reliability of goodwill valuation exist, preparers place clues that professional readers can notice and follow to determine the level of uncertainty. Preparers may only be encouraged to provide this information directly by introducing specific disclosure requirements.