The purpose of this research is to first examine whether the amount of impairment losses recognized by Thai listed firms is associated with the economic indicators suggested in the relevant accounting standard. Second, the study investigates whether efficiency versus opportunism dominates accounting for impairment by Thai listed firms.
The multiple regression model is used to test whether impairment indicators and reporting incentives associate with impairment losses for a sample of 1,418 non‐financial listed Thai companies during 1999‐2004.
Impairment losses are associated with all three levels (macro, industry, and firm‐specific performance measures) of impairment indicators described in Thai Accounting Standard (TAS) No. 36 (which is in accordance with the IAS No. 36). The results also reveal that management opportunistically recognizes impairment losses to smooth earnings when earnings increase. Inconsistent with Francis et al. and Riedl, the association between impairment losses and economic factors is relatively greater than that between impairment losses and reporting incentives behaviors.
This is the first study that provides empirical evidence for the indicators of assets' impairment prescribed in TAS/IAS No. 36. The results support the pre‐condition indicators for measurement of impairment losses under TAS/IAS No. 36 in the emerging Thai capital market. Further, efficiency is documented to dominate opportunism as the principal of Thai firms' accounting policy with respect to asset impairment.
