Le politiche di earnings management applicate all’impairment test: evidenze empiriche in Italia e nel Regno Unito

The issue of earnings management practices is extremely important and of undeniable relevance, especially in light of the recent financial scandals due to the intentional alteration of the values reported in financial statements. The attention devoted to this topic by both the academic and the professional world, at both national and international level, signals, at the same time, the importance of the financial statements as informational and behavioral tool for a growing number of stakeholders, and the sensitivity it information content. Moreover, the constant evolution that characterizes the legislation and accounting standards guiding the preparation of financial statements allows the managers interested in achieving desired performance goals to find out, in correspondence to such evolution, new fields of application of earnings management practices. A topical example of the accounting evolution is identifiable in the adoption of IAS/IFRSs, that are mandatory for European listed companies for the consolidated financial statement, starting from 2005. Indeed, the transition to the new accounting standards has determined the adoption of new, and innovative, technical-accounting procedures and value configurations, different from those previously applied in many European countries. One of the most relevant innovation is the impairment test prescribed by IAS 36 - Impairment of Assets; such test aims at verifying the existence - or, conversely, the decline – of the book value of the assets exposed in the balance sheet. The complex architecture of the test implies the formulation, by management, of a number of assumptions and estimates on which the parallel evaluation processes required by IAS 36 are based. The impairment test therefore leaves ample scope for exercising subjective choices by management, who may use discretionary margins to implement earnings management practices. Well, although this topic is widely discussed, in theory, by Financial Accounting literature, so far the number of empirical research on the topic is really scarce and focused only on the American context. The results of the studies in question are unambiguous in demonstrating that goodwill impairment test has been used by the management of large samples of North American companies as a tool for implementing big bath earnings management practices. All that being stated, a study on the issue of earnings management policies applied to the impairment test referred to some European countries may contribute to the development of the Financial Accounting literature. Consequently, this thesis explores the issue of impairment of assets practices carried out by parent companies listed on the Italian financial market and on the UK financial market, with the following purposes: - verifying the dependence of the impairment loss recognized in the income statement by earnings management practices, in the form of big bath earnings management; - identifying and interpreting any differences in the modus operandi of the Italian companies compared to UK companies in the preparation of financial statements, particularly with regard to the implementation of the impairment test. The thesis structure can be summarized as follows: - the first part aims at studying, mostly in theoretical and interpretive terms, the main "themes" on which the study will focus, i.e., respectively, earnings management practices and impairment test. A first objective of the research is to define, based on a review of existing literature, the vision of earnings management taken as a reference later in this work, through a reasoned survey of the assumptions underlying the implementation of earnings management practices, the objectives pursued through their implementation, the incentives that lead management to make use of a wide variety of accounting tricks and tools in order to achieve the desired purpose. With respect to the second topic, a study of the content of the impairment test, as regulated by IAS 36 - Impairment of Assets, is carried out. In particular, after briefly traced the fundamental characteristics of the said verification process and the scope thereof, the areas of technical discretion available to the managers are traced, and the possible opportunistic uses in terms of earnings management are identified. In addition, a brief review of empirical studies developed in the context of North American on earnings management practices applied to the impairment of assets process, particularly to goodwill impairment test, is here proposed. The above review of international literature permits to create a "map" of the routes already covered by the research scholars of Financial Accounting, the assumptions underpinning the various empirical studies, the statistical analysis methods used to test the hypotheses, and the results already achieved; - the second part of the thesis is devoted to the empirical research, realized with the intent to combine the two subjects previously analyzed separately. Such empirical research aims at analyzing the behavior adopted by management when developing the impairment test, i.e. at verifying whether the impairment test is used as a tool for earnings management by Italian and UK parent companies. The choice of this two contexts of analysis, Italy and UK, which will first be analyzed separately and then compared, it's not random but is based on the existence of significant differences between the two countries in terms of size and vitality of the stock market, the size of the companies listed therein, the institutional system, culture, accounting, etc.. In brief, empirical research aims at achieving the following objectives: - improving the knowledge of the phenomenon of the impairment of assets procedure, in terms of magnitude and frequency of the impairment losses recorded after the first application of the procedure itself and thereafter; - verifying the existence of signals about impairment tests abnormal results consistent with the form of big bath earnings management - or alternative configurations of earnings management; - analyzing and comparing the empirical evidence collected by the appropriate statistical tests with reference, on the one hand, to Italy and, on the other hand, to UK.