Impairment losses: causes and impacts

Abstract

Purpose -To analyze recognition of impairment losses in tangible and intangible assets, and their relevance to investors in companies listed in the Lisbon and Madrid Stock Exchange (2007-2011). Findings -We found that the amount of impairment losses showed an upward trend, and that these losses are most significant among intangibles, especially goodwill (GW). We also found that the probability of recognition of impairment losses is positively influenced by the dimension of entities and negatively by market value (p < 0.10). Portuguese export-oriented companies have a higher probability of not recognizing impairments. However, Portuguese companies with higher market values have greater probability of recognizing impairment losses, contrary to the sample as a whole, in which the relationship is negative (p < 0.10). The results also suggest that there is a smoothing effect on results because of impairments, especially in IBEX35 companies. As to the relevance of impairment losses to market value, we confirm a significant negative relationship, in line with conclusions from previous studies. MethodologyOriginality/value -This study contributes to the introduction of the cultural factor in this analysis, highlighting the differentiated behaviors between Portuguese and Spanish companies.

Doing Well or Doing Good: The Relationship between Corporate Social Responsibility and Profit in Romanian Companies

“…In conclusion, we can say that the companies are "doing good" when are they are "doing well". The results concord with the conclusions of Margolis [63] and other researchers [60,80].…”

“…The size of the profit depends on the turnover [79] and by analyzing the accounting policies of the companies, this indicator is one of the hardest to manipulate by a company's management, which means that there is a high degree of certainty for the value of this indicator. Another indicator that influences the profitability and value of companies is assets impairment which negatively influences the stock price, as this affects the future financial performance [80].…”

Does the Mark-to-Model Fair Value Measure Make Assets Impairment Noisy?: A Literature Review

“…A significant factor recognised by Fernandes et al [43] and Szczesny and Valentincic [44] is the size of the company. Fernandes et al [43] found that the probability of an impairment loss announcement is correlated positively with an affiliation to the biggest business entity and negatively with the market value.…”

“…A significant factor recognised by Fernandes et al [43] and Szczesny and Valentincic [44] is the size of the company. Fernandes et al [43] found that the probability of an impairment loss announcement is correlated positively with an affiliation to the biggest business entity and negatively with the market value. Moreover, Alciatore et al [45] showed that a decline in asset values, reflected in returns prior to the impairment announcement, is correlated with the write-down amount.…”