TY - JOUR
T1 - Effects of the asymmetric accounting treatment of tangible and intangible impairments in IAS36
T2 - International evidence
AU - Karampinis, Nikolaos I.
AU - Hevas, Dimosthenis L.
PY - 2014/12/1
Y1 - 2014/12/1
N2 - Using an international sample of 21 countries that follow International Financial Reporting Standards (IFRS), we investigate the association of tangible and intangible asset impairments with future cash flows. International Accounting Standard 36 (IAS36) requires that an asset shall be impaired when its recoverable amount is lower than its carrying amount in financial statements. Future cash flows constitute a core determinant of the estimated recoverable amounts. However, IAS36 treats tangible and specific kinds of intangible assets, such as goodwill, in an asymmetric fashion; while impairment tests for tangible assets shall be performed when relevant indicators exist (such as predictions of decreased future cash flows), specific kinds of intangible assets, such as goodwill, shall be tested on an annual basis. Consistent with our expectations, we find that this asymmetric treatment enhances timeliness of goodwill impairments but decreases their reliability in forecasting future cash flows compared to tangible impairments.
AB - Using an international sample of 21 countries that follow International Financial Reporting Standards (IFRS), we investigate the association of tangible and intangible asset impairments with future cash flows. International Accounting Standard 36 (IAS36) requires that an asset shall be impaired when its recoverable amount is lower than its carrying amount in financial statements. Future cash flows constitute a core determinant of the estimated recoverable amounts. However, IAS36 treats tangible and specific kinds of intangible assets, such as goodwill, in an asymmetric fashion; while impairment tests for tangible assets shall be performed when relevant indicators exist (such as predictions of decreased future cash flows), specific kinds of intangible assets, such as goodwill, shall be tested on an annual basis. Consistent with our expectations, we find that this asymmetric treatment enhances timeliness of goodwill impairments but decreases their reliability in forecasting future cash flows compared to tangible impairments.
KW - Accounting asymmetries
KW - Asset impairment
KW - IAS36
KW - IFRS
UR - http://www.scopus.com/inward/record.url?scp=84908702998&partnerID=8YFLogxK
U2 - 10.1016/j.jeca.2014.08.001
DO - 10.1016/j.jeca.2014.08.001
M3 - Article
AN - SCOPUS:84908702998
SN - 1703-4949
VL - 11
SP - 96
EP - 103
JO - Journal of Economic Asymmetries
JF - Journal of Economic Asymmetries
ER -