Reversal of impairment losses, firm performance and reporting incentives: Evidence from Malaysia

Malaysian Financial Reporting Standard (FRS) No. 136, Impairment of Assets, was issued in 2005. The standard requires public listed companies to report their non-current assets at no more than their recoverable amount. When the value of impaired assets is recovered, or partly recovered, FRS 136 requires the impairment charges to be reversed to its new recoverable amount. This study tests whether the reversal of impairment losses by Malaysian firms is more closely associated with economic reasons or reporting incentives. The sample of this study consists of 182 public companies listed on Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange) that reported reversals of their impairment charges during the period 2006-2009. These firms are matched with firms which do not reverse impairment on the basis of industrial classification and size. In the year of reversal, this study finds that the reversal firms are more profitable (before reversals) than their matched firms. On average, the Malaysian stock market values the reversals of impairment losses positively. These results suggest that the reversals generally reflect increases in the value of the previously impaired assets. After partitioning firms that are likely to manage earnings and those that are not, this study finds that there are some Malaysian firms which reverse the impairment charges to manage earnings. Their reversals are not value-relevant, and are negatively associated with future firm performance. On the other hand, the reversals of firms which are deemed not to be earnings managers are positively associated with both future firm performance and current stock price performance, and this is the dominant motivation for the reversal of impairment charges in Malaysia. In further analysis, this study provides evidence that the opportunistic reversals are also associated with other earnings management manifestations, namely abnormal working capital accruals and the motivation to avoid earnings declines. In general, the findings suggest that the fair value measurement in impairment standard provides useful information to the users of financial statements.

Assessment of dietary background exposure of the Irish adult population to dioxins and PCBs particularly taking into account additional exposure due to the 2008 Irish dioxin food contamination incident

Irish monitoring data on PCDD/Fs, DL-PCBs and Marker PCBs were collated and combined with Irish Adult Food Consumption Data, to estimate dietary background exposure of Irish adults to dioxins and PCBs. Furthermore, all available information on the 2008 Irish pork dioxin food contamination incident was collated and analysed with a view to evaluate any potential impact the incident may have had on general dioxin and PCB background exposure levels estimated for the adult population in Ireland. The average upperbound daily intake of Irish adults to dioxins Total WHO TEQ (2005) (PCDD/Fs & DLPCBs) from environmental background contamination, was estimated at 0.3 pg/kg bw/d and at the 95th percentile at 1 pg/kg bw/d. The average upperbound daily intake of Irish adults to the sum of 6 Marker PCBs from environmental background contamination ubiquitous in the environment was estimated at 1.6 ng/kg bw/d and at the 95th percentile at 6.8 ng/kg bw/d. Dietary background exposure estimates for both dioxins and PCBs indicate that the Irish adult population has exposures below the European average, a finding which is also supported by the levels detected in breast milk of Irish mothers. Exposure levels are below health based guidance values and/or Body Burdens associated with the TWI (for dioxins) or associated with a NOAEL (for PCBs). Given the current toxicological knowledge, based on biomarker data and estimated dietary exposure, general background exposure of the Irish adult population to dioxins and PCBs is of no human health concern. In 2008, a porcine fat sample taken as part of the national residues monitoring programme led to the detection of a major feed contamination incidence in the Republic of Ireland. The source of the contamination was traced back to the use of contaminated oil in a direct-drying feed operation system. Congener profiles in animal fat and feed samples showed a high level of consistency and pinpointed the likely source of fuel contamination to be a highly chlorinated commercial PCB mixture. To estimate additional exposure to dioxins and PCBs due to the contamination of pig and cattle herds, collection and a systematic review of all data associated with the contamination incident was conducted. A model was devised that took into account the proportion of contaminated product reaching the final consumer during the 90 day contamination incident window. For a 90 day period, the total additional exposure to Total TEQ (PCDD/F &DL-PCB) WHO (2005) amounted to 407 pg/kg bw/90d at the 95th percentile and 1911 pg/kg bw/90d at the 99th percentile. Exposure estimates derived for both dioxins and PCBs showed that the Body Burden of the general population remained largely unaffected by the contamination incident and approximately 10 % of the adult population in Ireland was exposed to elevated levels of dioxins and PCBs. Whilst people in this 10 % cohort experienced quite a significant additional load to the existing body burden, the estimated exposure values do not indicate approximation of body burdens associated with adverse health effects, based on current knowledge. The exposure period was also limited in time to approximately 3 months, following the FSAI recall of contaminated meat immediately on detection of the contamination. A follow up breast milk study on Irish first time mothers conducted in 2009/2010 did not show any increase in concentrations compared to the study conducted in 2002. The latter supports the conclusion that the majority of the Irish adult population was not affected by the contamination incident.