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

Author

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  • Takashi Obinata

    (Faculty of Economics, University of Tokyo)

  • Takako Okuda

    (Graduate School 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.

Suggested Citation

  • Takashi Obinata & Takako Okuda, 2008. ""Accounting Behavior of Firms Recognizing Impairment Losses"(in Japanese)," CIRJE J-Series CIRJE-J-194, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:jseres:2008cj194
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2008/2008cj194.pdf
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    Cited by:

    1. Keishi Fujiyama, 2020. "Incorporating Piecewi se-linear Variables into an Empirical Model of Non-current Asset Impairment Timeliness," Discussion Paper Series DP2020-31, Research Institute for Economics & Business Administration, Kobe University, revised Oct 2021.

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