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

See all articles by Gianluca Ginesti

Gianluca Ginesti

Department of Economics, Management, Institutions - University of Naples

Carlo Drago

Università degli Studi "Niccolò Cusano"

Giuseppe Sannino

Second University of Naples - Department of Economics

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

Ginesti, Gianluca and Drago, Carlo and Sannino, Giuseppe, Impairment Estimates for Available-for-Sale Equity Instruments Under IFRS: Evidence from Italian Banks (February 17, 2015). Financial Reporting, 2014 , Available at SSRN: https://ssrn.com/abstract=2566338

Gianluca Ginesti (Contact Author)

Department of Economics, Management, Institutions - University of Naples ( email )

via Cinthia, 4
Naples, Caserta 80126
Italy

Carlo Drago

Università degli Studi "Niccolò Cusano" ( email )

Via Don Carlo Gnocchi, 3
Rome, 00166
Italy

Giuseppe Sannino

Second University of Naples - Department of Economics ( email )

Corso Gran Priorato di Malta
Capua, Caserta 81043
Italy

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