Depreciation and impairment. A tradeoff in a stewardship setting

Scholze A, Wielenberg S (2007) Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld.
Bielefeld: Universität Bielefeld.

Download
OA
Working Paper | Published | English
Author
;
Abstract
This paper examines the relationship between depreciation and future impairment losses. This relationship exists, since impairment losses can only be recognized if the carrying amount of an asset exceeds a certain recoverable amount that can be defined in different ways. Sufficiently large depreciation charges in the beginning of the asset's useful life make it very unlikely that an impairment acutally occurs in future periods. In the context of a multi-period agency model with ex ante long-term investment, and ex post short-term effort incentives, we will show that this relationship causes a tradeoff during the useful life of the asset. In order to induce efficient investment decisions, the investment cost has to be allocated over future periods according to a specific depreciation schedule. However, those depreciation charges decrease the likelihood that impairment losses will occur in later periods. Therefore the information content of the performance measure will be decreased as well. We apply our result to impairment tests according to IFRS and US-GAAP, the accounting for goodwill, and accounting rules for similar problems.
Publishing Year
PUB-ID

Cite this

Scholze A, Wielenberg S. Depreciation and impairment. A tradeoff in a stewardship setting. Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld. Bielefeld: Universität Bielefeld; 2007.
Scholze, A., & Wielenberg, S. (2007). Depreciation and impairment. A tradeoff in a stewardship setting (Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld). Bielefeld: Universität Bielefeld.
Scholze, A., and Wielenberg, S. (2007). Depreciation and impairment. A tradeoff in a stewardship setting. Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld, Bielefeld: Universität Bielefeld.
Scholze, A., & Wielenberg, S., 2007. Depreciation and impairment. A tradeoff in a stewardship setting, Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld, Bielefeld: Universität Bielefeld.
A. Scholze and S. Wielenberg, Depreciation and impairment. A tradeoff in a stewardship setting, Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld, Bielefeld: Universität Bielefeld, 2007.
Scholze, A., Wielenberg, S.: Depreciation and impairment. A tradeoff in a stewardship setting. Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld. Universität Bielefeld, Bielefeld (2007).
Scholze, Andreas, and Wielenberg, Stefan. Depreciation and impairment. A tradeoff in a stewardship setting. Bielefeld: Universität Bielefeld, 2007. Diskussionspapiere / Fakultät für Wirtschaftswissenschaften, Universität Bielefeld.
Main File(s)
Access Level
OA Open Access

This data publication is cited in the following publications:
This publication cites the following data publications:

Export

0 Marked Publications

Open Data PUB

Search this title in

Google Scholar