An Investigation of Asset Write-Downs and Concurrent Abnormal Accruals

Rees, Lynn L.; Gill, Susan; Gore, Richard A.

doi:10.2307/2491431

Cited by 163 publications

(100 citation statements)

References 10 publications

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“…They found that asset impairment and managerial incentives are important determinants of asset write-offs. Meanwhile, Rees et al (1996) examined the effect of abnormal accruals of firms, which recognized continuous asset impairment in their financial reports, in order to detect any systematic pattern of earning management in the year of the write-down. They found that pre-write-off earnings are, on average, significantly worse than industry medians, which is consistent with the "big bath" reporting behaviour.…”

Section: Methodsmentioning

confidence: 99%

“…Moreover, we believe that assigning new CEOs to the companies will increase the chance of utilizing the MFRS 136 toward big bath behaviour (Rees et al, 1996;Beneish, 2001). This study focuses on these two issues by collecting a random sample of 250 listed Malaysian firms and building a comparison between companies which reported goodwill impairment losses and those which did not, between the period of 2011 and 2012; that is, before and after the full convergence of the MRFS 136.…”

Section: Introductionmentioning

confidence: 99%

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Accounting Standards, Goodwill Impairment and Earnings Management in Malaysia

Abuaddous¹,

Hanefah²,

Laili³

2014

IJEF

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This paper has two objectives. The first is to investigate whether the provision of MFRS 136 (that is equivalent to IAS 36) allows for an earnings management technique termed "big bath" in Bursa Malaysia and, whether the change in firms' CEOs plays a role in goodwill impairment loss recognition. The second objective is to examine the application of goodwill impairment loss recognition under the provision of MFRS136 in Bursa Malaysia between 2011-2012, using a "Mann-Whitney U" test. Our findings suggest that companies utilize goodwill impairment to take a "bath" regarding earnings management. Moreover, we find that Malaysian companies struggle to understand the ambiguity of the Value in Use (VIU) method under the MFRS 136 as they tend to take extreme accounting treatment strategies. Finally, we find that the new CEOs in Malaysian companies are more conservative in accounting treatment than CEOs with long tenure.

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Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Accounting Standards, Goodwill Impairment and Earnings Management in Malaysia

Abuaddous¹,

Hanefah²,

Laili³

2014

IJEF

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“…Haw et al (1998), through to our county securities market "earnings management" situation of empirical research, found that the listed companies in China is mainly through the control of "below-the-line" to achieve the allotment of the SFC conditions, that is, through the investment income, non-operating revenue and expenditure and profits of non-core business projects. Francis et al (1996) & Rees et al (1996, on the voluntary asset impairment companies' research, demonstrated the presence of earnings management behavior by weak evidence. Chinese scholars WeiTao, Zhengfei Liu & Hongwei Shan (2007) found whether loss or profit the company's earnings management is quite rely on non-recurring items by studying the behavior of China 's listed companies using non-recurring gains and losses to manage earnings.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact in Earnings Management of Fair Value Measurement Based on Electric Power Industry

Liu¹,

Yu²

2013

IBR

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Earnings management has always been the focus of Accounting Research, but under the new accounting standards, the introduction of fair value may create space for earnings management of listed companies. The existence of earnings management behavior in the power industry, which is a pillar industry in China's national economy, is related to the healthy and orderly development of China's national economy. Based on the related financial data from 2006 to 2011 of listed companies in electric power industry and from investment income and asset impairment losses two aspects, this paper uses descriptive statistics analysis and regression analysis method for empirical research, and then found the existence of earnings management behavior in the power industry. According to conclusions, this paper puts forward relevant suggestions for related information users to analyzing or making decision offering support.

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“…4 We limit our analysis to upward revaluations as these represent the area of most concern to regulators and practitioners with the advent of international accounting standards. Asset writedowns are commonplace in the US and have been examined extensively (e.g., Rees, Gill and Gore, 1996). We focus solely on upward revaluations as there is scant evidence addressing the issue of reliability of these estimates.…”

Section: Aasb 1010 Accounting Formentioning

confidence: 99%

“…However, managers have some discretion over the manner in which recoverable amount is calculated, thereby leaving considerable discretion relating to the timing and magnitude of write-downs in the hands of managers. Using US data, researchers have found evidence that management acts opportunistically in the year of the write-down to improve future years earnings (e.g, Rees, Gill and Gore, 1996). In Australia, Cotter, Stokes and Wyatt (1998) find that similar factors explain write-downs of assets taken to the income statement.…”

Section: Aasb 1010 Accounting Formentioning

confidence: 99%

Untitled

Cotter¹,

Richardson²

2002

Review of Accounting Studies

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In this paper we examine whether there are differences in the reliability of asset revaluations made by boards of directors versus independent (external) appraisers. We use a sample of recognized Australian asset revaluations. As a first step we examine the determinants of the choice between director-based revaluations and those undertaken by independent appraisers. We find that independent appraisers are more likely to be used for revaluations of land and buildings and directors are more likely for investments, plant and equipment and identifiable intangibles.We interpret this as evidence of firms harnessing directors' knowledge of asset specificities. We also find that firms with less independent boards are more likely to use independent appraisers.We interpret this as evidence of substitutability between governance mechanisms. As for differences in reliability, we find that revaluations of plant and equipment that are made by independent appraisers are more reliable than those by directors. However, we are unable to detect a difference for other classes of non-current assets. We define reliability in terms of expost adjustments of recognized value increases. Reliability is determined by an examination of the extent to which upward revaluations are subsequently reversed.

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An Investigation of Asset Write-Downs and Concurrent Abnormal Accruals

Cited by 163 publications

References 10 publications

Accounting Standards, Goodwill Impairment and Earnings Management in Malaysia

Accounting Standards, Goodwill Impairment and Earnings Management in Malaysia

Impact in Earnings Management of Fair Value Measurement Based on Electric Power Industry

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