Impairment Accounting Practice in Jordanian Industrial Public Shareholding Companies under IAS 36

Aims: The object of the research is to provide empirical evidence on the Jordanian industrial companies how to measure a value of their non-current assets impairment through analysis of Discount Cash Flows (DCF), to reach evidence that the occurrence of impairments is less dependent on financial performance.

Study Design: The pertinent data was investigated for a 4 year period, i.e. a total of 120 observations (year- company) were tested. I adopted descriptive statistics, regressions ,and correlations to find out the relationship among the variables and their strength, the study uses panel data analysis to estimate what a dependent variable will be for a given values of independent variables.

Methodology: The author has randomly collected a panel of (30) industrial public Shareholding companies listed in Amman Stock Exchange (ASE) out of 73 companies covering the period for four years 2005-2008. The author tested the effects of Independent Variables on Impairment write-off using the panel data methodology.

Originality/Value: This work contributes to the literature in two ways: First, no previous evidence such this exists for the case of IMP. Second, unlike previous studies, TAS, OCF, DER, ROA, and ROE have been examined as proxies for IMP in the current work.

Findings: It is shown that there is a positive weak and insignificant relationship between Impairment Loss (IMP), and financial indicators, such as Return on Assets (ROA), and Return on Equity (ROE). It is also shown that there is a negative weak and, insignificant relationship between IMP and Debt Ratio (DER). It seems that there is little possibility of adjusting IMP by using these indicators. The result of coefficient of determination shows that approximately 76% of changes in IMP are related to Operating Cash Flows (OCF), and Total Assets (TAS). Similarly, increase of Operating Cash Flows (OCF) will lead to increase of IMP. It appears that the purported increase in monitoring of highly leverage companies, ROA and ROE were not perceived as a significance by the industrial companies, therefore had no influence on IMP, but TAS is negatively correlated with DER.`