| dc.description.abstract | national Financial Reporting Standards (IFRS) are principle-based
accounting standards that rely on management judgment and the use of
private information. For this reason, it cannot be assumed that the harmonization
of accounting standards will result in consistent application in practice.
The IAS 36 Impairment of Assets is a standard that requires considerable
judgment when applied. This dissertation studies how IAS 36 is applied, with
a focus on listed European shipping companies and the impairment of ships.
The study investigates which factors influence decisions in order to recognize
impairment losses in practice and what information is provided in annual
report disclosures regarding impairment. To assess the extent of impairment
losses, a study of the annual reports of all listed shipping companies in the EU
has been conducted for the years 2007 through 2010. To obtain more in-depth
information at the company level, interviews have been conducted at ten
shipping companies from six different countries.
The results demonstrate that there is a general reluctance to recognize impairment
losses, as they are seen as a negative signal by the market and create
unwanted volatility in financial statements. Therefore, it can be assumed that
impairment losses are delayed in relation to economic substance. There is also
the risk that impairment charges will be excessive when they are finally
recognized, with the aim of avoiding recurring charges. The study shows that
companies that are exposed to operational risks and volatility and that have
ships that are easy to value recognize excess depreciation charges in order to
avoid impairment losses. The fact that impairment losses are recognized can
be explained by market pressure as well as opportunistic factors. If the market
knows that an asset is impaired, a company may be forced to recognize an
impairment loss. Companies can also exploit the market’s expectations by
recognizing impairment losses, and thereby create better prospects for the
future.
Regarding the information content of disclosures, results show that, based on
the information disclosed, it is difficult for users to assess estimation uncertainty
in the valuation. Moreover, disclosures are mainly adapted to national
users. If many shipping companies are listed on a specific national stock
market, the information content of disclosures from companies in that country
is generally greater.
One contribution of the study is that, in spite of the issues raised above,
principle-based accounting is found to work in some sense, at least as regards
the shipping industry. | sv |
