Detecting Asset Impairment Management: Some Evidence from Food and Beverage Listed Companies

The purpose of this paper is twofold: (a) to bring on issues of asset impairment manipulation in the earning management context (b) to examine, any statistical inference validating impairment discretionary charges and firms’ earning experience. Problem statement: The Impairment accounting standard (IAS 36), enters new requirements for asset impairment provided to satisfying accrued loss amounts. Earning Management through the use of asset impairments within constrains of taking accounting process results to income manipulation representing a) an external demand to meet earnings forecasts b) internal demand for communicating board’ level performance. We expect to present a critical view of the earnings discretion and provide an answer on the prevailing content of asset impairment. The sample constituted of 26 Food and Beverage firms, listed in the Greek Stock Exchange Market on the basis of impairment observations. We analyze the earnings levels for two groups of companies, impairers and non- impairers in both 2005 and 2006 years. Results and Findings suggest (a) firms recording impairment charges possess lower earnings than do their counterparts not recording write downs and (b) the impairment losses are likely reported as timely opportunity to taking “big bath” and increasing future earnings. However we estimate that Greek firms’ operating performance is engaged to earning adjustments on a) taxable environment and b) new accounting rules, than to liable income strategies