Impairment Estimates for Available-for-Sale Equity Instruments Under IFRS: Evidence from Italian Banks
Financial Reporting, 2014
Posted: 18 Feb 2015 Last revised: 7 Mar 2015
Date Written: February 17, 2015
Abstract
Literature indicates that accounting policy choices under a given set of standards is an important topic due to the different economic implications. Daske et al. (2013) suggest that firms have substantial discretion in applying IFRS. Despite the implications on how the firms apply IFRS have motivated many studies, to our knowledge, little is known about the impairment estimates for the available-for-sale (AFS) equity instruments. Using a sample of Italian banks over the period 2010-2011, we investigate the determinants of the accounting decisions for impairment estimates. We find that the reporting quality and profitability are explanatory factors of the banks’ decisions to modify the thresholds of the impairment indicators used to assess AFS equity instruments. Our study also suggests that banks use discretion in implementing the IAS 39 to determine the impairment of the AFS equity instruments.
Keywords: financial instruments, IFRS, accounting choices, impairment, financial reporting
JEL Classification: M48
Suggested Citation: Suggested Citation