The Association among Information Transparency, Asset Impairments and Future Cash Flows

• Main Authors: CHENG WEN HSIANG, 鄭文湘
• Other Authors: Shiue Min Jeng
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/59877135883742465662

碩士 === 輔仁大學 === 會計學系碩士班 === 101 === Due to the fact that more and more complexity of business operation in recent years, the traditional accounting theory based on historical cost can not reflect the appropriate value of the assets of enterprises. In order to reflect the economic substance, fair value accounting is ranked as the mainstream to the assessments of tangible and intangible assets. In 2004, IASC issued IAS NO.36 "Impairment of Assets", and R.O.C. SFAS issued No.35 "Accounting for Impairment of Assets." in the same year for IFRS-compliant. Under the guidance of R.O.C. SFAS No.35, firms should evaluate whether asset impairments exist when there is an indicator of asset impairments. When the future cash flows of the asset estimated is less than its book value of the enterprise, the asset shall be recognized appropriate impairment losses. However, only a few studies indirectly examined the linkage between asset impairment recognized in current year and future cash flow which motivated this study. Past literature indicates that the asset impairment recognized by the company will improve the information relevance of earning when a better corporate governance mechanism exists. The purpose of this study is to examine the role of information transparency in asset impairment, by testing the relation among information transparency, asset impairments and future cash flows. Research samples are collected from publicly traded companies in Taiwan stock market from 2005 to 2010 and the methodology is applied the approach given by Aboody et al.(1999). The empirical results show that the accordance with SFAS 35 of the companies with relatively higher information transparency is better than those firms with relatively lower information transparency. And as expected, the companies with asset impairment recognized this period, will have lower cash flow from operating activities in the next period.