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An Empirical Study on the Relationship between Accounting Conservatism and Asset Impairment Recognition: Evidence from Companies in Taiwan

Author

Listed:
  • Mei-Chu HUANG

    (Chung Yuan Christian University, Taiwan)

  • Chan-Chuan TING

    (Chung Yuan Christian University, Taiwan)

  • Yu-Jia CHEN

    (Lu-Chu Senior High School, Taiwan)

Abstract

In this study, we investigate the impact of the conservatism of a company’s financial statements on management’s motivation to recognize asset impairment, and the impact of accounting conservatism on prior period impairment losses and gains on impairment reversal. The empirical results showed that a higher accounting conservatism level can reduce management manipulation for recognized more impairment losses in the prior period and then more gains on impairment reversal. That is, a higher level of accounting conservatism can reduce prior period impairment losses, recognized by managers, to make reserves to facilitate the recognition of gains on impairment reversal in a later period, to apparently ‘improve’ earnings.

Suggested Citation

  • Mei-Chu HUANG & Chan-Chuan TING & Yu-Jia CHEN, 2018. "An Empirical Study on the Relationship between Accounting Conservatism and Asset Impairment Recognition: Evidence from Companies in Taiwan," Management and Economics Review, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 3(1), pages 58-74, June.
    • Handle: RePEc:rom:merase:v:3:y:2018:i:1:p:58-74
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    More about this item

    Keywords

    asset impairment; gains on impairment reversal; accounting conservatism.;
    All these keywords.

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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