Impair or not to impair? A longitudinal cross-country study of the application of IAS 36 Impairment of Assets

Dianne Massoudi

Research output: ThesisDoctoral Thesis

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[Truncated abstract] This thesis investigates the application of International Accounting Standard IAS 36 Impairment of Assets by Australian and European Union (EU) companies over time. I examine impairment reporting practices to determine the factors that explain the incidence and amount of impairment, the extent of IAS 36 compliance and factors that explain the extent of compliance. The mandatory adoption of IFRS across countries is based on the premise that a shared set of high quality accounting standards will improve transparency and comparability of financial information across capital markets. However, the application of a standard that requires managerial judgement may not result in comparable financial statements due to the discretion allowed in financial reporting. This thesis investigates the extent to which IAS 36 has been consistently applied across country and time. This study uses a random sample of 367 listed companies from Australia, France, Germany, Italy, Sweden and the UK over the 2005-2009 period. I assess whether economic conditions, managers’ financial reporting incentives and company level factors explain variations in impairment reporting practices. My first finding is that managers are more likely to report impairment when their company’s financial performance worsens. Companies that report lower levels of profitability or report a loss are more likely to impair. Also, companies with potential market indicators of impairment are more likely to report impairment. Companies may be reporting impairment to communicate their economic conditions. Alternatively, managers may be engaging in big bath behaviour and choose to report impairment during declining performance.
Original languageEnglish
QualificationDoctor of Philosophy
Publication statusUnpublished - 2014


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