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.

Farmers, agriculture and politics in the Irish Free State area, 1919-1936

Given the economic and social importance of agriculture in the early years of the Irish Free State, it is surprising that the development of organisations representing farmers has not received the attention it deserves from historians. While the issues of government agricultural policy and the land question have been extensively studied in the historiography, the autonomous response by farmers to agricultural policies and the detailed study of the farmers’ organisations has simply been ignored in spite of the existence of a range of relevant primary sources. Farmers’ organisations have only received cursory treatment in these studies; they have been presented as passive spectators, responding in a Pavlovian manner to outside events. The existing historiography has only studied farmers’ organisations during periods when they impinged on national politics, epecially during the War of Independence and the Economic War. Therefore chronological gaps exist which has led to much misinterpretation of farmers’ activities. This thesis will redress this imbalance by studying the formation and continuous development of farmers’ organisations within the twenty-six county area and the reaction of farmers to changing government agricultural policies, over the period 1919 to 1936. The period under review entailed many attempts by farmers to form representative organisations and encompassed differing policy regimes. The thesis will open in 1919, when the first national organisation representing farmers, the Irish Farmers’ Union, was formed. In 1922, the union established the Farmers’ Party. By the mid- 1920’s, a number of protectionist agricultural associations had been formed. While the Farmers’ Party was eventually absorbed by Cumann na nGaedheal, local associations of independent farmers occupied the resultant vacuum and contested the 1932 election. These organisations formed the nucleus of a new national organisation; the National Farmers’ and Ratepayers’ League. The agricultural crisis caused by both the Great Depression and the Economic War facilitated the expansion of the league. The league formed a political party, the Centre Party, to contest the 1933 election. While the Centre Party was absorbed by the newly-formed Fine Gael, activists from the former farmer organisations led the campaign against the payment of annuities and rates. Many of them continued this campaign after 1934, when the Fine Gael leadership opposed the violent resistance to the collection of annuities. New farmer organisations were formed to co-ordinate this campaign which continued until 1936, the closing point of the thesis.