"Accounting Behavior of Firms Recognizing Impairment Losses"(in Japanese)

Takashi Obinata and Takako Okuda
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Takashi Obinata: Faculty of Economics, University of Tokyo
Takako Okuda: Graduate School of Economics, University of Tokyo

No CIRJE-J-194, CIRJE J-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: The purpose of this paper is to investigate the accounting performance of the firms recognizing impairment losses and analyze the accounting behavior of those firms. We focus on two performance measures, i.e. sales margin and earnings to average total asset (ROA). Firms recognizing impairment losses experienced the decrease in ROA before. After the recognition of impairment losses, ROA was improved. That time-series movement is consistent with the conventional view. However, profit margin did not change in such a clear manner. Although, some firms with impairment losses smoothed earnings, we can find only weak evidence on earnings increasing management. On the other hand, we detect the strong evidence of "big bath" accounting. Our results imply the defects in accounting standards of impaired assets, which permits the large room of managerial discretion.

Pages: 86 pages
Date: 2008-04
New Economics Papers: this item is included in nep-acc
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Persistent link: https://EconPapers.repec.org/RePEc:tky:jseres:2008cj194

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