برگشت کاهش ارزش: گزارش بی طرف یا مدیریت درآمد Impairment Reversals: unbiased reporting or earnings management?

1. Introduction The reversal of an impairment of a non-current asset under International Accounting Standard (IAS) 36 is an aspect of fair value accounting that has the effect of increasing current earnings. This study begins by testing if the Malaysian version of IAS 36, Financial Reporting Standard (FRS) 136, is generally applied in an unbiased fashion or if it is used to opportunistically increase earnings. While FRS136, a standard based on fair value accounting, is an improvement in terms of the relevance and timeliness of accounting information relative to the historical cost approach, it also provides managers with opportunities to manage earnings. Such earnings management may cause the reversals not to be a faithful representation of the recovery of the asset values. It should be noted that the reversal of an impairment charge under IAS 36 is one of the major differences between the two major accounting standard setting bodies in the world: the IASB and FASB. Thus there is no universal agreement on the best way to treat assets which have been impaired and are reckoned to have recovered some or all of their value. FASB prohibit the reversal of an impairment charge made against non-current assets on the grounds that an impaired asset is on a new cost basis. Duh et al. (2009) is the only paper that studies the reversal of impairments under IAS 36. They report evidence that companies in Taiwan that have made larger impairments, use the reversal of such impairments to boost current earnings when the earnings are below the benchmark of the prior year’s earnings, the FASB approach is justified. The current paper takes a closer look at the reversal of impairments with a view to providing additional evidence surrounding this question. In addition, the excellent disclosure practices by the vast majority of Malaysian companies with respect to accumulated impairment charges allows us to examine the relation between impairment reversals and prior big baths far more closely. Noting that a prior big bath is an indication of historical earnings management we further extend Duh et al. (2009) by examining the relation between current earnings management, proxied by abnormal working capital accruals (AWCA) and impairment reversals. Firms with high positive values for AWCA, particularly those with weak corporate governance, can be classified as upward managers of current earnings. The relation between an impairment reversal and its real earnings management alternative of an opportunistic asset sale is also discussed. Our first research question pertains to the overall application of FRS 136 and whether it is used in an unbiased or in an opportunistic fashion. We base our approach on that of Duh et al. (2009). These authors examine if a sample of 55 firms that reverse impairments differ from a sample matched on industry and size in Taiwan. We extend the Duh et al. (2009) analysis by paying particular attention to firms that have taken a prior big bath and those that display a tendency to manage current earnings upward using alternative methods. While Duh et al. (2009) are restricted to considering the reversal of impairments made in within a period of approximately one to two years our Malaysian data allows us consider the reversal an impairment loss regardless of when that impairment was made.