Value relevance of asset write-offs/write-downs and effectiveness of FASB pronouncements (SFAS #121, #142, #144).

摘要

This study, from the long-term association study perspective, aims to examine whether asset write-off/write-down (WO/WD) information is value relevant and whether SFAS #121, #142 and #144 are effective in improving the information value of both the asset WO/WD information and the aggregate accounting numbers. Further, to better understand the market valuation process and provide standard setters with more insights about WO/WD activities, the value relevance (timeliness) of goodwill impairment charges as well as other categorized asset WO/WD charges is separately investigated.; The empirical results suggest that (1) on average, asset WO/WD is value relevant information, but not reported in a timely fashion; (2) the overall explanatory power of the major accounting information reported by WO/WD firms' is of no difference from that of their non-WO/WD counterparts after controlling for profitability; (3) SFAS #121 did not help to improve value relevance or timeliness of reported financial information; (4) SFAS #142 and #144 have made the asset impairment charges more aligned with book value and share prices; (5) SFAS #142 and #144 have improved the alignment between book value and market value for all adopting firms (WO/WD or non-WO/WD); (6) goodwill impairment charges are not value relevant in the pre-142 period; but became significant negative value signals in the post-142 time regime; (7) information value of asset WO/WD differ across types of assets involved (and WO/WD reasons): market interprets WO/WD of current assets, PPE, and deferred charges (pure-impairment and DISC-related-impairment in case of WO/WD reasons) as negative value signals (with different magnitudes); however, the coefficients attached to WO/WD of non-GW intangibles or R&D-in-process (RESTR-related or M&A-related in case of "reasons) are not significantly different from zero.; This is the first study that thoroughly examined the value relevance of (categorized) asset WO/WD and the effectiveness of three consecutively announced FASB pronouncements by using quasi-hand-collected data over a long and recent sample period (1992-2004). Empirical findings from this area of research will contribute to the study of security evaluation process, provide valuable feedbacks to the concurrent accounting guidance and supplement asset WO/WD accounting literature with empirical evidence from the association study perspective.