THE EFFECT OF DEBT CHARACTERISTICS ON THE RECOGNITION OF IMPAIRMENT LOSSES
DOI :
https://doi.org/10.4270/ruc.2019213Mots-clés :
Impairment, Accounting Conservatism, Debt.Résumé
This paper investigates the role played by debt regarding impairment practices of Brazilian publicly traded firms when there are market expectations for the booking of impairment losses, motivated by the premise that debt contracting is the most important source of demand for impairment rules. Our sample of Brazilian publicly traded firms includes 206 unique firms and 7 calendar years, resulting in 1010 firm-year observations. Within this setting, 98 out of 206 firms are in persistently low market-to-book states in at least one period during our sample years. Despite that, there are only 51 firm year observations, regarding only 21 unique firms, in which an impairment loss was recorded. We test debt related hypothesis analyzing the statistical relation between the level of unrecognized economic losses and four debt related variables, the debt to equity ratio, the ratio of short-term debt to total debt, the presence of bonds in the companies’ liabilities and the level of debt financing in the year t. We report evidence that there is an inverted u-shaped relationship between leverage and the level of unrecognized losses. This result suggests that accounting conservatism decreases once the firm secures debt funding but increases for more indebted firms. Short term debt is positively associated to the level of unrecognized impairment losses, indicating that the constant monitoring managers are subject to when they have to frequently renegotiate debt substitutes for accounting conservatism.
Téléchargements
Références
Adam, T., & Goyal, V. K. (2008). The investment opportunity set and its proxy variables. Journal of Financial Research, 31(1), 41-63.
Amiraslani, H., Iatridis, G. E., & Pope, P. F. (2013). Accounting for asset impairment: a test for IFRS compliance across Europe. Centre for Financial Analysis and Reporting Research (CeFARR).
André, P., Filip, A., & Paugam, L. (2015). The effect of mandatory IFRS adoption on conditional conservatism in Europe. Journal of Business Finance & Accounting, 42(3-4), 482-514.
Angrist, J. D., & Pischke, J. S. (2008). Mostly harmless econometrics: An empiricist's companion. Princeton university press.
Armstrong, C. S., Taylor, D. J., & Verrecchia, R. E. (2016). Asymmetric Reporting. Journal of Financial Reporting, 1(1), 33–35.
Ball, R., & Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, 159-178.
Ball, R., Kothari, S. P., & Nikolaev, V. V. (2013). Econometrics of the Basu asymmetric timeliness coefficient and accounting conservatism. Journal of Accounting Research, 51(5), 1071-1097.
Ball, R., Robin, A., & Sadka, G. (2008). Is financial reporting shaped by equity markets or by debt markets? An international study of timeliness and conservatism. Review of accounting studies, 13(2-3), 168-205.
Banker, R. D., Basu, S., & Byzalov, D. (2016). Implications of impairment decisions and assets' cash-flow horizons for conservatism research. The Accounting Review, 92(2), 41-67.
Banker, R., Basu, S., & Byzalov, D. (2014). The role of multiple impairment indicators in conditional conservatism. Working Paper, 204-236.
Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings1. Journal of Accounting and Economics, 24(1), 3-37.
Bini, M., & Penman, S. (2013). Companies with Market Value below Book Value Are More Common in Europe than in the US: Evidence, Explanations, and Implications. Report, KPMG (24 April).
Bond, D., Govendir, B., & Wells, P. (2016). An evaluation of asset impairments by Australian firms and whether they were impacted by AASB 136. Accounting & Finance, 56(1), 259-288.
Carvalho, P. S. (2017). Perfil e Determinantes do Mercado de Debêntures no Brasil no Período 2004-2014 (Tese de Doutorado). Universidade Federal do Rio de Janeiro, Programa de Pós-Graduação em Economia, , Rio de Janeiro.
Chalmers, K., & Godfrey, J. (2006). Intangible assets: diversity of practices and potential impacts from AIFRS adoption. Australian Accounting Review, 16(40), 60-71.
Choi, T. H. (2008). Asset Write-offs: An Empirical Investigation of Timeliness. Asia-Pacific Journal of Accounting & Economics, 15(1), 11-27.
Danielson, M. G., & Press, E. (2003). Accounting returns revisited: Evidence of their usefulness in estimating economic returns. Review of Accounting Studies, 8(4), 493-530.
Decourt, R. F., & Procianoy, J. L. (2012). O Processo Decisório sobre a Distribuição de Lucros das Empresas Listadas na BM & FBOVESPA: Survey com CFOs. Revista Brasileira de Finanças, 10(4), 461-498.
Detzen, D., Stork genannt Wersborg, T., & Zülch, H. (2016). Impairment of Goodwill and Deferred Taxes Under IFRS. Australian Accounting Review, 26(3), 301-311.
European Security Markets Authority. European enforcers review of impairment of goodwill and other intangible assets in the IFRS financial statements. Disponível em: <https://www.knf.gov.pl/knf/pl/komponenty/img/2013-02_report_on_goodwill_57461.pdf>.
Filip, A., Jeanjean, T., & Paugam, L. (2015). Using real activities to avoid goodwill impairment losses: Evidence and effect on future performance. Journal of Business Finance & Accounting, 42(3-4), 515-554.
Florou, A., & Kosi, U. (2015). Does mandatory IFRS adoption facilitate debt financing? Review of Accounting Studies, 20(4), 1407-1456.
Gallani, S., Krishnan, R., & Wooldridge, J. M. (2015). Applications of fractional response model to the study of bounded dependent variables in accounting research. Harvard Business School.
Gigler, F., Kanodia, C., Sapra, H., & Venugopalan, R. (2009). Accounting conservatism and the efficiency of debt contracts. Journal of Accounting Research, 47(3), 767-797.
Glaum, M., Schmidt, P., Street, D. L., & Vogel, S. (2013). Compliance with IFRS 3-and IAS 36-required disclosures across 17 European countries: company-and country-level determinants. Accounting and Business Research, 43(3), 163-204.
Goex, R. F., & Wagenhofer, A. (2009). Optimal impairment rules. Journal of Accounting and Economics, 48(1), 2-16.
Guthrie, J., & Pang, T. T. (2013). Disclosure of Goodwill Impairment under AASB 136 from 2005–2010. Australian Accounting Review, 23(3), 216-231.
Healy, P. M. (2016). Reflections on M&A accounting from AOL’s acquisition of Time Warner. Accounting and Business Research, 46(5), 528-541.
Jarva, H. (2014). Economic consequences of SFAS 142 goodwill writeâ€offs. Accounting & Finance, 54(1), 211-235.
Ji, K. (2013). Better late than never, the timing of goodwill impairment testing in Australia. Australian Accounting Review, 23(4), 369-379.
Kallapur, S., & Trombley, M. A. (1999). The association between investment opportunity set proxies and realized growth. Journal of Business Finance & Accounting, 26(3â€4), 505-519.
Khurana, I. K., & Wang, C. (2015). Debt maturity structure and accounting conservatism. Journal of Business Finance & Accounting, 42(1-2), 167-203.
Knauer, T., & Wöhrmann, A. (2016). Market reaction to goodwill impairments. European Accounting Review, 25(3), 421-449.
Kogan, L., & Papanikolaou, D. (2014). Growth opportunities, technology shocks, and asset prices. The Journal of Finance, 69(2), 675-718.
Kothari, S. P. (2001). Capital markets research in accounting. Journal of Accounting and Economics, 31(1-3), 105-231.
Leuz, C., & Wysocki, P. D. (2016). The economics of disclosure and financial reporting regulation: Evidence and suggestions for future research. Journal of Accounting Research, 54(2), 525-622.
Liang, K. Y., & Zeger, S. L. (1986). Longitudinal data analysis using generalized linear models. Biometrika, 73(1), 13-22.
Lu, X. C., & Trabelsi, S. (2013). Information asymmetry and accounting conservatism under IFRS adoption. In Anais, CAAA Annual Conference.
Mazzi, F., André, P., Dionysiou, D., & Tsalavoutas, I. (2017). Compliance with goodwill-related mandatory disclosure requirements and the cost of equity capital. Accounting and Business Research, 47(3), 268-312.
Mazzioni, S., Politelo, L., Moreira, W. J., & Klann, R. C. (2014). Fatores determinantes na evidenciação da redução ao valor recuperável de ativos (impairment test) em empresas listadas na Bm&Fbovespa. Revista Base da UNISINOS, 11(4), 276-291.
Oler, M. (2015). Determinants of the length of time a firm’s book-to-market ratio is greater than one. Review of Quantitative Finance and Accounting, 45(3), 509-539.
Papke, L. E., & Wooldridge, J. M. (2008). Panel data methods for fractional response variables with an application to test pass rates. Journal of Econometrics, 145(1-2), 121-133.
Paugam, L., Astolfi, P., & Ramond, O. (2015). Accounting for business combinations: Do purchase price allocations matter? Journal of Accounting and Public Policy, 34(4), 362-391.
Ramanna, K., & Watts, R. L. (2012). Evidence on the use of unverifiable estimates in required goodwill impairment. Review of Accounting Studies, 17(4), 749-780.
Riedl, E. J. (2004). An examination of long-lived asset impairments. The Accounting Review, 79(3), 823-852.
Schiehll, E., Terra, P. R. S., & Victor, F. G. (2013). Determinants of voluntary executive stock option disclosure in Brazil. Journal of Management & Governance, 17(2), 331-361.
StataCorp, L. P. (2015). Stata statistical software (version release 14). College Station, TX: Author.
Szczesny, A., & Valentincic, A. (2013). Asset writeâ€offs in private firms–The case of German SMEs. Journal of Business Finance & Accounting, 40(3-4), 285-317.
Szczesny, A., & Valentincic, A. (2013). Asset writeâ€offs in private firms–The case of German SMEs. Journal of Business Finance & Accounting, 40(3-4), 285-317.
Watts, R. L. (2003a). Conservatism in accounting part I: Explanations and implications. Accounting Horizons, 17(3), 207-221.
Watts, R. L. (2003b). Conservatism in accounting part II: Evidence and research opportunities. Accounting Horizons, 17(4), 287-301.
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT press.
Wrubel, F., Marassi, R. B., & Klann, R. C. (2015). Determinantes do reconhecimento de perdas por impairment em empresas brasileiras. Revista de Administração, Contabilidade e Economia da Fundace, 6(1).
Zani, J., & Procianoy, J. L. (2007). Restrição Financeira e a Dependência de Colateral para o Endividamento das Firmas Brasileiras. In Anais, XXXI Encontro da ANPAD, Rio de Janeiro: ANPAD.
Téléchargements
Publié-e
Comment citer
Numéro
Rubrique
Licence
Os direitos autorais para artigos publicados nesta revista são do autor, com direitos de primeira publicação para a revista. Em virtude de aparecerem nesta revista de acesso público, os artigos são de uso gratuito, com atribuições próprias, em aplicações educacionais e não-comerciais. A revista permitirá o uso dos trabalhos publicados para fins não-comerciais, incluindo direito de enviar o trabalho para bases de dados de acesso público. Os artigos publicados são de total e exclusiva responsabilidade dos autores.
• O(s) autor(es) autoriza(m) a publicação do artigo na revista;
• O(s) autor(es) garante(m) que a contribuição é original e inédita e que não está em processo de avaliação em outra(s) revista(s);
• A revista não se responsabiliza pelas opiniões, ideias e conceitos emitidos nos textos, por serem de inteira responsabilidade de seu(s) autor(es);
• É reservado aos editores o direito de proceder ajustes textuais e de adequação do artigo às normas da publicação;
• O(s) autor(es) declaram que o artigo não possui conflitos de interesse.
