Some characteristics of an equity security next-year impairment

Julien Azzaz (), Stéphane Loisel and Pierre-Emmanuel Thérond
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Julien Azzaz: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon

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Abstract: In this paper, we propose some characteristics of next-year impairments in a generic Black & Scholes framework, with one equity security, and under IFRS rules. We derive expression for the probability of impairment event for an equity-security recognized in the available-for-sale (AFS) category. Our decomposition of this event is also useful to retrieve barrier options valuation methods. From there, we obtain an explicit formula for the rst moment of impairment value and its cumulative distribution function, as well as sensitivities. Numerical studies are carried out on concrete securities. We also study a mean-preserving one-criterion proxy used by some insurance practitioners for the next-year impairment losses and discuss its relevance. More generally, our study paves the way for applications of nancial mathematics techniques to accounting issues related to impairments in the IFRS framework.

Keywords: impairment; fair value; equity securities; dépréciation; juste valeur; actions; IFRS; IAS 39 (search for similar items in EconPapers)
Date: 2015-07
Note: View the original document on HAL open archive server: https://hal.science/hal-00820929v2
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Citations: View citations in EconPapers (5)

Published in Review of Quantitative Finance and Accounting, 2015, 45 (1), pp.111-135. ⟨10.1007/s11156-014-0432-x⟩

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Related works:
Journal Article: Some characteristics of an equity security next-year impairment (2015)
Working Paper: Some characteristics of an equity security next-year impairment (2014)
Working Paper: Some characteristics of an equity security next-year impairment (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00820929

DOI: 10.1007/s11156-014-0432-x

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