Mandated Disclosures Under IAS 36 Impairment of Assets and IAS 38 Intangible Assets: Value Relevance and Analysts’ Forecasts

36 Pages Posted: 8 Jun 2014

See all articles by Paul André

Paul André

HEC Lausanne

Dionysia Dionysiou

University of Stirling

Ioannis Tsalavoutas

University of Glasgow - Accounting and Finance Group

Date Written: June 6, 2014

Abstract

Drawing on a large sample of European firms, we examine whether compliance with mandated disclosures under IAS 36 Impairment of Assets and IAS 38 Intangible Assets are value relevant and affect analysts’ forecasts. We focus on these two standards because intangible assets represent significant amounts on companies’ balance sheets. Additionally, impairment tests give rise to concerns about their implementation quality. Our results indicate a mean (median) compliance level of about 84% (86%) but high variation among firms; and disclosure levels regarding IAS 36 being much lower than those regarding IAS 38. In depth analysis reveals that non-compliance relates mostly to proprietary information and information that reveals managers’ judgment and expectations. Furthermore, we find a positive (negative) relationship between average disclosure levels and market values (analysts’ forecast dispersion). Results, however, hold more specifically for disclosures related to IAS 36, and these also improve analysts’ forecast accuracy. Our findings add knowledge regarding the economic consequences of mandatory disclosures, have an appeal to regulators and financial statement preparers, and reflect on the IASB’s concerns to increase the guidance and principles on presentation and disclosure in the revised Conceptual Framework.

Keywords: IAS 36, IAS 38, Intangibles, Impairments, Value relevance, Analysts' forecasts, Mandatory disclosures

JEL Classification: M40, M41, M48, G10

Suggested Citation

Andre, Paul and Dionysiou, Dionysia and Tsalavoutas, Ioannis, Mandated Disclosures Under IAS 36 Impairment of Assets and IAS 38 Intangible Assets: Value Relevance and Analysts’ Forecasts (June 6, 2014). Available at SSRN: https://ssrn.com/abstract=2447016

Paul Andre (Contact Author)

HEC Lausanne ( email )

UNIL-Dorigny
Anthropole
Lausanne, 1015
Switzerland

Dionysia Dionysiou

University of Stirling ( email )

Accounting and Finance Division
Stirling, FK9 4LA
United Kingdom

Ioannis Tsalavoutas

University of Glasgow - Accounting and Finance Group ( email )

Glasgow, Scotland G12 8QQ
United Kingdom

HOME PAGE: http://www.gla.ac.uk/schools/business/staff/yannistsalavoutas/

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