Impairment Of Long-lived Assets Research Articles

Determinants of Tangible Long-Lived Asset Impairments under US GAAP and IFRS

This paper explores determinants of tangible long-lived asset impairments under US GAAP and IFRS. Using a sample covering 26 countries, we document that US GAAP impairments are more related to macroeconomic factors consistent with the built-in delay in reporting impairments under two-step impairment testing and measuring the impairment loss at fair value. IFRS impairments are more associated with firm-specific factors consistent with measuring the impairment at value-in-use and a one-step impairment test. Results also indicate US GAAP impairments are more associated with reporting incentives, except for having private debt. Further, when enforcement is low, impairments are less (more) associated with economic factors (reporting incentives) for IFRS reporters.

A study of long-lived asset impairment under U.S. GAAP and IFRS within the U.S. institutional environment

This paper explores whether differences in accounting standards influence reporting behavior within the U.S. institutional environment where both IFRS and U.S. GAAP are used for reporting purposes. We focus on the accounting for impairment of long-lived assets, an area where significant differences exist between U.S. GAAP and IFRS. We identify all U.S.-listed firms who have recognized long-lived asset impairment losses during the 2004–2012 period. From these firms, we identify firms following IFRS, then develop a matched sample of U.S. GAAP firms, using a propensity score matching procedure. We examine the relation between impairment loss and unexpectedly high or low earnings in the year of impairment using a two-stage Heckman regression model, controlling for industry, country, year of write-down, and firm-level economic factors. We find that the association between impairment losses and unexpectedly high and low earnings is significantly greater for U.S. GAAP firms as compared to IFRS reporting firms, implying differences in accounting standards influence firm financial reporting. Our findings are robust to alternative measures of country level institutional factors and macro-economic variables, as well as inclusion of asset impairment reversals.

Tangible Long-Lived Asset Impairments and Future Operating Cash Flows under U.S. GAAP and IFRS

ABSTRACTThis paper investigates the predictive value of tangible long-lived asset impairments for changes in future operating cash flows under U.S. GAAP and IFRS. We find that impairments reported under IFRS are negatively associated with changes in future operating cash flows, whereas those under U.S. GAAP, on average, are not. We investigate whether differences in the predictive value are attributable to differences in recognition or measurement, providing evidence suggesting that impairment recognition under U.S. GAAP is delayed. Evidence also suggests that the value-in-use measurement attribute, allowed under IFRS, does not induce under-impairing as IFRS and U.S. GAAP impairments are similarly related to future impairments. The main result of a negative association under IFRS, but not U.S. GAAP, holds after considering future impairments to control for measurement differences, macro-economic factors, and firm reporting incentives. Further, impairment losses under IFRS are more predictive in high-enforcement countries.JEL Classifications: D78; F02; M16; M41; G38.Data Availability: Data used are available from sources identified in the paper.

Long-Lived Asset Impairments and Future Performance Under US GAAP and IFRS

This paper investigates the ability of long-lived asset impairments to predict future operating cash flows under US GAAP and IFRS. We provide evidence that total impairments reported under IFRS are negatively and persistently associated with future operating cash flows whereas those under US GAAP generally are not. Under IFRS, impairments of tangible long-lived assets are more informative than those of intangible assets and goodwill. We further explore the predictive content of reported write-offs under IFRS in different institutional settings, including legal origins and enforcement, and find that impairment losses under IFRS are more informative in common law and high enforcement countries. In general, the findings suggest greater informativeness of long-lived asset impairments under IFRS than US GAAP. The informativeness, however, depends on the type of assets impaired and the institutional characteristics.

The Impairment of Long-Lived Assets and Reversing Revaluation Review under US GAAP VS. IFRS Models in the United States

The impairment valuation of assets plays a central role in the accounting and operating decisions of the multinational companies. Although these techniques based on a similar theory, they may generate different results in application. This study incorporates an empirical approach to compare the outcomes of the two valuations: under US GAAP and IFRS (International Financial Reporting Standards). The aim of this study it to make the observation whether these valuation methods result in different values and to contribute to the understanding of why these two valuations, although similar in theory, may generate different results when applied to real life companies. In addition, this study will respond to readers this article, what kind of the management decision should make CEO before the first-time adoption IFRS in the U.S.A from management accounting perspective. This article will help the audience develop and internalize a model for making business judgments.

The Impairment of Long-Lived Assets and Reversing Revaluation Review under US GAAP VS. IFRS Models in the United States

The Impairment of Long-Lived Assets and Reversing Revaluation Review under US GAAP VS. IFRS Models in the United States

Real Asset Liquidity and Asset Impairments

I examine how the presence of a more active (liquid) resale market for real assets influences the likelihood, timeliness, and magnitude of long-lived asset impairments. I find that firms with more liquid real assets are more likely to record an impairment both unconditionally and conditional on a signal of poor performance, consistent with an available resale market providing information useful in estimating fair value for long-lived operating assets. Impairments are more likely in tests using both industry-level measures of real asset liquidity and firm-specific measures of aircraft fleet liquidity for firms in the airline industry. Consistent with asset liquidity constraining managerial opportunism in delaying write-offs, I also find that impairments are timelier (more conditionally conservative) for firms with more liquid real assets and that impairment magnitudes vary more strongly with firm value. Finally, impairments for firms with more liquid real assets are associated with greater decreases in uncertainty around earnings announcements as measured by changes in option implied volatility.

Long-Lived Asset Impairments in the Shipping Industry and the Impact on Financial Statement Ratios: Comparing U.S. GAAP and IFRS Standards

In this paper, we investigate asset impairment standards particularly as they relate to differences between United States generally accepted accounting principles (US GAAP) and international financial reporting standards (IFRS) for the impairment of long-lived assets in the shipping industry and the corresponding impact on financial statement analysis ratios. Our study provides evidence that return on assets and asset turnover ratios diverge significantly as a result of the difference between US GAAP and IFRS on asset impairments within the shipping industry. Reporting differences between US GAAP and IFRS can impede the comparability of financial reporting. Asset impairment accounting differences can have significant differences for companies reporting under these two accounting standards.

Обесценение внеоборотных активов в соответствии с МСФО (IAS) 36

Обесценение внеоборотных активов в соответствии с МСФО (IAS) 36

How do firms react to the prohibition of long-lived asset impairment reversals? Evidence from China

New Chinese Accounting Standards (CAS) released on February 15, 2006, prohibit the reversal of long-lived asset impairments, effective for reporting periods beginning January 1, 2007 and later. This development in the Chinese market provides a unique experimental setting to directly investigate how firms react to the ban on previously-allowed long-lived asset impairment reversals, especially firms that use impairment charges as “cookie jar reserves.” By contrasting write-off recognition and reversal across the pre- and post- new CAS announcement regimes, we show that firms listed on Chinese stock exchanges recognized less impairment charges during the “transition” period—after announcement of the new standard and before the effective date—than in pre-announcement periods. Meanwhile, firms with substantial previous write-downs reversed more impairment charges to achieve their earnings targets in the transition period. The new CAS also constraints “big bath” reporting by loss firms. As US GAAP prohibits these reversals and IFRS allows them, our empirical evidence depicts firms’ possible reactions in other regimes contemplating doing away with such reversals.

An Examination of Long-Lived Asset Impairments

Prior research reveals that write-offs of long-lived assets are both large in magnitude and frequent in occurrence. Responding to calls for enhanced reporting of these items, the FASB issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets. However, its effect on the characteristics of reported write-offs remains unclear, as implementation requires inherently subjective estimates. Further, critics (including dissenting FASB board members and the SEC) question the standard's guidance. Motivated in part by this debate, this paper contrasts the characteristics of write-offs reported prior versus subsequent to the issuance of SFAS No. 121. Empirical results reveal that economic factors have a weaker association with write-offs reported after SFAS No. 121. This is consistent across macro, industry, and firm-specific variables. Results also indicate a higher association between write-offs and “big bath” reporting behavior after the standard's implementation, and that this “big bath” behavior more likely reflects opportunistic reporting by managers rather than the provision of their private information. These inferences are robust to a number of alternative specifications and variable definitions. Overall, the results suggest the reporting of write-offs under SFAS No. 121 has decreased in quality, consistent with criticisms of the standard.

An Examination of Long-Lived Asset Impairments

Prior research reveals that write-offs of long-lived assets are both large in magnitude and frequent in occurrence. Responding to calls for enhanced reporting of these items, the FASB issued SFAS 121, Accounting for the Impairment of Long-Lived Assets. However, its effect on the characteristics of reported write-offs remains unclear, as implementation requires inherently subjective estimates. Further, critics (including dissenting FASB board members and the SEC) question the standard's guidance. Motivated in part by this debate, this paper contrasts the characteristics of write-offs reported prior versus subsequent to the issuance of SFAS 121. Empirical results reveal that economic factors have a weaker mapping into write-offs reported after SFAS 121, consistent across macro, industry, and firm-specific variables. Results also indicate a higher association between write-offs and big bath reporting behavior after the standard's implementation, and that this big bath behavior more likely reflects opportunistic reporting by managers rather than the provision of their private information. These inferences are robust to a number of alternative specifications and variable definitions. Overall, the results suggest the reporting of write-offs under SFAS 121 has decreased in quality, consistent with criticisms of the standard.

Accounting for the impairment of long-lived assets: Evidence from the petroleum industry

We investigate write-downs of assets of oil and gas firms due to the application of the SEC full-cost ceiling test during the period of the largest decline in oil and gas prices since this test was mandated. The correlation between the write-down amounts and contemporaneous returns is statistically significant, but it is lower than the correlation with lagged returns. This and other evidence suggests that, although the market perceived that some of the decline in asset value occurred in the quarter in which the write-down was recorded, much of the share market price adjustment due to this decline occurred earlier.

Accounting for the impairment of long-lived assets: A review and update

Recent marks by SEC Chairman Arthur Levitt and Chief Accountant Lynn Turner have put new attention on certain provisions of SFAS No. 121. In light of the SEC concerns, the authors review and update the issue of asset impairment for readers. The authors also present the results of their review of note disclosures for 48 Fortune 500 firms. © 1999 John Wiley & Sons, Inc.

FASB/Special report on impairment of long‐lived assets, proposal on pension disclosures

Journal of Corporate Accounting & FinanceVolume 9, Issue 2 p. 147-149 Department FASB/Special report on impairment of long-lived assets, proposal on pension disclosures Paul Munter, Paul Munter Paul Munter, Ph.D., CPA, is KPMG Peat Marwick Professor of Accounting at the University of Miami. He is editor-in-chief of The Journal of Corporate Accounting & Finance.Search for more papers by this author Paul Munter, Paul Munter Paul Munter, Ph.D., CPA, is KPMG Peat Marwick Professor of Accounting at the University of Miami. He is editor-in-chief of The Journal of Corporate Accounting & Finance.Search for more papers by this author First published: 25 October 2006 https://doi.org/10.1002/jcaf.3970090215 AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Volume9, Issue2Winter 1998Pages 147-149 RelatedInformation

An examination of long-lived asset impairments under SFAS No. 121

Until recently, the impairment of long-lived assets and identifiable intangibles was a controversial and unresolved accounting issue. Statement of Financial Accounting Standards (SFAS) No. 121 on long-lived asset impairments provides guidelines in selecting the conditions or circumstances that justify or necessitate a writedown and in measuring, recognizing, and disclosing the amounts of asset impairments. The results indicate that the financial impacts of 935 writedowns reported by 670 companies are quite significant and, in some cases, up to 10 times that of reported earnings. Moreover, the results indicate that industry classification consistently had a significant effect on the dependent variables used as proxies for the financial impacts of asset impairments.

FAS 121: Some questions and answers on accounting for impairment of long‐lived assets

FAS 121: Some questions and answers on accounting for impairment of long‐lived assets

FAS 121 and APBIT: How to handle goodwill when accounting for the impairment of long‐lived assets

FAS 121 and APBIT: How to handle goodwill when accounting for the impairment of long‐lived assets

A closer look at recognition and measurement in impairment of long-lived assets

This article is a follow-up to an earlier article which appeared in the Winter 1993/94 issue of the Journal of Corporate Accounting and Finance. That article detailed the general provisions of the proposed Statement of Financial Accounting Standards. The intent of this article is to take a closer look at the recognition and measurement provisions of the proposed Statement and to examine the basis for the Board's tentative conclusions on recognition and measurement. The first two sections of the article detail the recognition and measurement standards. The third section examines the Board's basis for the recognition criteria chosen. The fourth section reviews the measurement alternatives considered by the Board, and explains the basis for the Board's tentative conclusions.

Writing off impaired long-lived assets: Discussion memorandum outlines options

In recent years, the selective write-downs of impaired long-lived assets has reduced the credibility, comparability, and consistency of financial reporting. In December 1990, the Financial Accounting Standards Board (FASB, or the Board) issued a Discussion Memorandum (DM) to solicit comments on related issues and to develop a consensus on the standards to be used in determining when and how the value of impaired assets should be written down. It is expected that the Board's project on the impairment of long-lived assets will ultimately result in one or more Statements of Financial Accounting Standards. This article provides a brief discussion of prior and current accounting practices regarding the impairment of long-lived assets and explores each of the issues identified in the Discussion Memorandum.