Disclosures for Assets Impairment in Extracting Industries: a Test for IFRS Compliance in Russian Federation

<p>This study investigates how well companies in extracting industries have implemented requirements under International Financial Reporting Standards (IFRS) for their impairment reporting practice. The main aim of this paper was to analyse the financial statements prepared under IFRS in 2012 by a sample of companies that operate in extracting industries in Russian Federation and to identify key factors that are associated with the compliance level. Extracting companies was examined in two samples: companies in oil and gas industry and companies in metal and mining industry. Calculation of the compliance score for companies in extracting industries was based on a compliance survey instrument that was constructed by analyzing all required disclosures for impairment testing. Another aim of this paper was to examine whether a range of firm-specific characteristics affects firms&rsquo; compliance. The conventional approach to this problem is based on using statistical methods of regression analysis.</p><p>The key findings of the research indicate that none of the companies in extracting industries fully comply with the requirements of IFRS for impairment reporting. The overall compliance score constituted 67%. This result shows that overall disclosure quality is rather low. However compliance score vary across asset classes. The disclosure quality for property, plant and equipment was generally low and accounted for only 52% while the disclosure quality for goodwill and intangible assets was higher at 73% and 71% accordingly.</p><p>The study also examines whether impairment disclosure quality is related to a range of firm-specific factors. The results suggest that disclosure quality is higher when companies are larger, have higher leverage and operate in metals and mining industry.</p>