International Journal of Accounting, Finance and Risk Management

Research Article | | Peer-Reviewed |

Assets Impairment Disclosure (IAS 36) and Real Earnings Management Practices of Listed Consumer Goods Companies in Nigeria

Received: Oct. 03, 2023    Accepted: Nov. 06, 2023    Published: Nov. 29, 2023
Views:       Downloads:

Share

Abstract

The study determined the effects of assets impairment disclosure on the real earnings management practices of the listed consumers’ goods companies in Nigeria. The population of the study comprises the 28 listed consumer goods companies on the Nigeria Stock Exchange and the census technique of sampling was adopted in which the population is the sample size. The study covered the period of eleven years (2010-2020). The independent variable includes the recognition of assets impairment proxied by 1 if recognised and 0 if otherwise while the dependent variable includes the real activities of earnings management proxied by operational abnormal cashflows with the control variables such as the firms’ size, firms age and ROA. Data were extracted from the financial report of the companies under consideration and analysed using the panel least square of regression analysis with the aid of E-views statistical tool. The findings of the study revealed a positive but insignificant effect of assets impairment disclosure on the real earnings management with coefficient value of 0.178012, t = 0.345786, p-value = 0.7298 > 0.05. Firms’ size indicated a negative and insignificant effect with r = -0.046184, t = -0.466285 and p-value = 0.6414 > 0.05. Firms’ age indicated also a negative and statistically insignificant effect with r = -0.017032, t = -0.02232 and p-value = 0.9822 > 0.05 while ROA indicated a positive and statistically significant effect at r = 0.0422, t = 2.2809 and p-value = 0.0233 < 0.05. The study recommended that accounting standards should be reviewed and updated so as to give a lesser opportunity for income smoothing and thereby enhance quality financial reporting system.

DOI 10.11648/j.ijafrm.20230804.13
Published in International Journal of Accounting, Finance and Risk Management ( Volume 8, Issue 4, December 2023 )
Page(s) 104-112
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Impairment Losses, Earnings Management, Earnings Quality, Positive Accounting Theory, Accounting Standards

References
[1] Abrigo, L. K. C. & Ferrer, R. C. (2015). The effect of management compensation and debt requirements on earnings management concerning the impairment of assets. Journal of Accountancy & Investment 17 (1), 1-21. DOI: 10.18196/jai.2016.0041.1-21.
[2] Adiasih, P., Effendy, A., Yuwono, C. D. & Octavia, N. (2018). Do the earnings management, governance, media exposure and ownership structure have any effect on ESG disclosure? Journal of Economics and Business 1 (4), 564-576. DOI: 10.31014/aior.1992.01.04.50.
[3] Al-kadash, H. & Salah, A. Y. (2009). Goodwill impairment after business combination among Jordanian shareholding companies. Journal of Accounting and Taxation 1 (2), 23-33.
[4] Andrews, R. (2012). Fair value, earnings management and assets impairment: The impact of a change in the regulatory environment. Procedia Economics and Finance 2 (2012), 16-25.
[5] BDO, (2020). Impairment implications of covid-19 (IAS 36 Impairment of Assets). International Financial Reporting Bulleting 2020/07.
[6] Cugova, A. & Cug, J. (2021). International financial reporting standards as a tool for earnings management. SHS web of conferences 92 (02012) (2021). https://doi.org/10.1051/shsconf/20219202012.
[7] Dai, D., Mao, X & Deng, F. (2007). A research on impairment of assets in listed firms with negative earnings in China. Front. Bus. Res. China (2007) 1 (3), 351-364.
[8] Ernfjord, K. & Voigt, M. (2018). Corporate social responsibility disclosure and earnings management. MSc. Project. University of Gothenburg.
[9] Grant, T. (2014). Impairment of assets. A guide to apply IAS 36 in practice.
[10] Hassine, N. M. & Jilani, F. (2017). Earnings management behaviour with respect to goodwill impairment losses under IAS 36: The French case. International Journal of Academic Research in Accounting, Finance and Management Sciences 7 (2), 177-196.
[11] Hong, P. K. & Paik, D. G. & Smith, J. V. D. L. (2018). A study of long-lived asset impairment under U.S. GAAP and IFRS within the U.S. institutional environment," Journal of International Accounting, Auditing and Taxation, Elsevier, 1 (C), 74-89.
[12] Ibrahim, S. M., Darus, F., Yusoff, H. & Muhamad, R. (2015). Analysis of earnings management practices and sustainability reporting for corporations that offer islamic product and services. Procedia Economics & Finance 28 (2015), 176-182.
[13] Jahmani, Y., Dowling, W. A. & Torres, P. D. (2010). Goodwill impairment: Anew window for earnings management. Journal of Business and Economic Research 8 (2), 19-24.
[14] Janssine, D. (2018). Corporate social responsibility, culture and earnings management. MSc. Accounting. Radboud University, Nijmegen.
[15] Kirchenheiter, M., and Melumad, N. (2001). Can “big bath” and earnings smoothing co-exist as equilibrium financial reporting strategies? Journal of Accounting Research, 40 (3), 761-797.
[16] Kustono, A. S., Agustini, A. T. & Dermawan, S. A. R. (2021a). Beware of the existence of a big bath with assets impairment after pandemic covid-19. The Indonesia Accounting Review 11 (1), 21-31.
[17] Kustono, A. S., Rosiq, A. & Nanggala, A. Y. A. (2021b). Earnings quality and income smoothing motives. Evidence from Indonesia. Journal of Asian Finance, Economics and Business 8 (2), 821-832.
[18] Oghoghomeh, T. & Akani, F. N. (2016). Assets Impairment testing: An analysis of IAS 36. An International Multidisciplinary Journal, Ethiopia 10 (1), 178-192.
[19] Olaleye, M. O., Agboola, J. O., Zaccheaus, S. A. & Oyerogba, E. O. (2014). Financial reporting and compliance of impairment of non-current assets in the Nigerian Banks. European Journal of Accounting, Auditing and Finance Research 2 (2), 18-35.
[20] Pyo, G. & Lee, H. Y (2013). Association between corporate social responsibility activities and earnings quality: Evidence from donations and voluntary issuance of CSR reports. Journal of Applied Business Research 29 (3), 945-962.
[21] Rasheed, M. S., Fareena, S. & Yousaf, T. (2019). Corporate governance and real earnings management: Evidence from Pakistan stock exchange. Pakistan Business Review 21 (2), 526-539.
[22] Rezaee, S. & Tuo, L. (2019). Are the quantity and quality of sustainability disclosures associated with the innate and discretionary earnings quality? Journal of Business Ethics.
[23] Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics 42 (2006), 335-370.
[24] Santos, O. M., Santos, A. & Silva, P. D. A (2011). Recognition of losses to impairment of assets: impairment in oil operation and production assets. Brazilian Business Review 8 (2), 66-91.
[25] Suieia, T. T. & Wang, J. (2019). The association between corporate social responsibility and earnings quality: Evidence from extractive industry. Revista de Contabilidad Spanish Accounting Review 22 (1) (2019), 112-121.
[26] Stenheim, T. and Madsen, D. (2016). Goodwill Impairment Losses, Economic Impairment, Earnings Management and Corporate Governance (January 27, 2016). Journal of Accounting and Finance, Vol. 16 (2) 2016, 11-30, Available at SSRN: https://ssrn.com/abstract=2890472
[27] Trisnawati, R., Wiyadi, Setiawati, F. (2016). Sustainability reporting and earnings management. Proceeding-Kuala Lumpur International Business, Economics and Law Conference II. December 17-18, 2016. Hotel Bangi-Putrajaya, Bangi, Malaysia.
[28] Ubesie, M. C., Nwankwo, B. G. O. & Nwankwo, P. E. (2020). Appraisal of the impact of earnings management on financial performance of consumer goods firms in Nigeria. Journal of Finance and Accounting 2020; 8 (1), 34-47.
[29] Van de Poel, K., Maijoor, S., & Vanstraelen, A. (2008). Implementation of IFRS within Europe: the case of goodwill. (http://aaahq.org.meetings/AUD2009/Implementationof IFRS.pdf) (07-01-2009).
[30] Watts, R., & Zimmerman, J. (1990). Positive Accounting Theory: A Ten Years Perspective. The Accounting Review, 65, 131-156.
[31] Yip, Erica; Van Staden, Chris; and Cahan, Steven, Corporate Social Responsibility Reporting and Earnings Management: The Role of Political Costs, Australasian Accounting, Business and Finance Journal, 5 (3), 2011, 17-34.
Cite This Article
  • APA Style

    Abosede Joshua, A., Alao, O., Oyesola Salawu, R., Emmanuel Ige, O. (2023). Assets Impairment Disclosure (IAS 36) and Real Earnings Management Practices of Listed Consumer Goods Companies in Nigeria. International Journal of Accounting, Finance and Risk Management, 8(4), 104-112. https://doi.org/10.11648/j.ijafrm.20230804.13

    Copy | Download

    ACS Style

    Abosede Joshua, A.; Alao, O.; Oyesola Salawu, R.; Emmanuel Ige, O. Assets Impairment Disclosure (IAS 36) and Real Earnings Management Practices of Listed Consumer Goods Companies in Nigeria. Int. J. Account. Finance Risk Manag. 2023, 8(4), 104-112. doi: 10.11648/j.ijafrm.20230804.13

    Copy | Download

    AMA Style

    Abosede Joshua A, Alao O, Oyesola Salawu R, Emmanuel Ige O. Assets Impairment Disclosure (IAS 36) and Real Earnings Management Practices of Listed Consumer Goods Companies in Nigeria. Int J Account Finance Risk Manag. 2023;8(4):104-112. doi: 10.11648/j.ijafrm.20230804.13

    Copy | Download

  • @article{10.11648/j.ijafrm.20230804.13,
      author = {Abimbola Abosede Joshua and Olubunmi Alao and Rafiu Oyesola Salawu and Oludele Emmanuel Ige},
      title = {Assets Impairment Disclosure (IAS 36) and Real Earnings Management Practices of Listed Consumer Goods Companies in Nigeria},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {8},
      number = {4},
      pages = {104-112},
      doi = {10.11648/j.ijafrm.20230804.13},
      url = {https://doi.org/10.11648/j.ijafrm.20230804.13},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijafrm.20230804.13},
      abstract = {The study determined the effects of assets impairment disclosure on the real earnings management practices of the listed consumers’ goods companies in Nigeria. The population of the study comprises the 28 listed consumer goods companies on the Nigeria Stock Exchange and the census technique of sampling was adopted in which the population is the sample size. The study covered the period of eleven years (2010-2020). The independent variable includes the recognition of assets impairment proxied by 1 if recognised and 0 if otherwise while the dependent variable includes the real activities of earnings management proxied by operational abnormal cashflows with the control variables such as the firms’ size, firms age and ROA. Data were extracted from the financial report of the companies under consideration and analysed using the panel least square of regression analysis with the aid of E-views statistical tool. The findings of the study revealed a positive but insignificant effect of assets impairment disclosure on the real earnings management with coefficient value of 0.178012, t = 0.345786, p-value = 0.7298 > 0.05. Firms’ size indicated a negative and insignificant effect with r = -0.046184, t = -0.466285 and p-value = 0.6414 > 0.05. Firms’ age indicated also a negative and statistically insignificant effect with r = -0.017032, t = -0.02232 and p-value = 0.9822 > 0.05 while ROA indicated a positive and statistically significant effect at r = 0.0422, t = 2.2809 and p-value = 0.0233 < 0.05. The study recommended that accounting standards should be reviewed and updated so as to give a lesser opportunity for income smoothing and thereby enhance quality financial reporting system.
    },
     year = {2023}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Assets Impairment Disclosure (IAS 36) and Real Earnings Management Practices of Listed Consumer Goods Companies in Nigeria
    AU  - Abimbola Abosede Joshua
    AU  - Olubunmi Alao
    AU  - Rafiu Oyesola Salawu
    AU  - Oludele Emmanuel Ige
    Y1  - 2023/11/29
    PY  - 2023
    N1  - https://doi.org/10.11648/j.ijafrm.20230804.13
    DO  - 10.11648/j.ijafrm.20230804.13
    T2  - International Journal of Accounting, Finance and Risk Management
    JF  - International Journal of Accounting, Finance and Risk Management
    JO  - International Journal of Accounting, Finance and Risk Management
    SP  - 104
    EP  - 112
    PB  - Science Publishing Group
    SN  - 2578-9376
    UR  - https://doi.org/10.11648/j.ijafrm.20230804.13
    AB  - The study determined the effects of assets impairment disclosure on the real earnings management practices of the listed consumers’ goods companies in Nigeria. The population of the study comprises the 28 listed consumer goods companies on the Nigeria Stock Exchange and the census technique of sampling was adopted in which the population is the sample size. The study covered the period of eleven years (2010-2020). The independent variable includes the recognition of assets impairment proxied by 1 if recognised and 0 if otherwise while the dependent variable includes the real activities of earnings management proxied by operational abnormal cashflows with the control variables such as the firms’ size, firms age and ROA. Data were extracted from the financial report of the companies under consideration and analysed using the panel least square of regression analysis with the aid of E-views statistical tool. The findings of the study revealed a positive but insignificant effect of assets impairment disclosure on the real earnings management with coefficient value of 0.178012, t = 0.345786, p-value = 0.7298 > 0.05. Firms’ size indicated a negative and insignificant effect with r = -0.046184, t = -0.466285 and p-value = 0.6414 > 0.05. Firms’ age indicated also a negative and statistically insignificant effect with r = -0.017032, t = -0.02232 and p-value = 0.9822 > 0.05 while ROA indicated a positive and statistically significant effect at r = 0.0422, t = 2.2809 and p-value = 0.0233 < 0.05. The study recommended that accounting standards should be reviewed and updated so as to give a lesser opportunity for income smoothing and thereby enhance quality financial reporting system.
    
    VL  - 8
    IS  - 4
    ER  - 

    Copy | Download

Author Information
  • Department of Accounting, Mountain Top University, Makogi Oba, Nigeria

  • Department of Accounting, Babcock University, Ilishan Remo, Nigeria

  • Department of Accounting, Obafemi Awolowo University, Ile-Ife, Nigeria

  • Department of Accounting, Babcock University, Ilishan Remo, Nigeria

  • Section