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.

Acoustic behaviour, ecology and social structure of bottlenose dolphins (Tursiops truncatus, Montagu 1821) in the North Atlantic

Communication is important for social and other behavioural interactions in most marine mammal species. The bottlenose dolphin (Tursiops truncatus, Montagu, 1821) is a highly social species that use whistles as communication calls to express identity and to initiate and maintain contact between socially interactive individuals. In this thesis, the degree of variability in whistle behaviour and whistle characteristics was examined between different habitats on a range of spatial scales. The whistle characteristics that best discriminated between different communities were investigated, along with exploration of whistle variation in relation to habitat type, levels of social interaction and relatedness. Finally, the use and variability of individually distinctive calls (signature whistles) within and between Irish and US waters were also examined. Relatively high levels of whistle variation were found within a genetically and socially isolated population of dolphins in the Shannon Estuary, reflecting the need for individual identification and distinctive whistles in a population with long term site fidelity and high levels of social cohesion. Variation between reproductively separate communities in Irish waters was relatively small except between animals in inshore compared with continental shelf waters. The greatest differences in whistle structure overall were evident between dolphins using inshore and offshore US waters, likely reflecting social isolation of the two distinct ecotypes that occur in these waters but also variation in behaviour or habitat conditions. Variation found among inshore communities in US waters reflected similarities in habitat use and levels of social interaction. These findings suggest that vocal variation is socially mediated, behaviourally maintained and dependent on levels of social contact between individuals. The findings contribute to our understanding of the interaction of factors influencing vocalisation behaviour in this behaviourally complex and ecologically plastic species.