FRC welcomes improvements in impairment disclosures

A Financial Reporting Council review panel has found that 22 of 30 large companies analysed have improved the impairment disclosures in their financial statements.

In December 2008 the Financial Reporting review panel wrote to 30 large companies advising them that the impairment disclosures in their next set of financial statements would be subject to review for compliance with IAS 36 ‘Impairment of assets’. The aim of the project was to stimulate improvements in disclosures about impairment and to test assumptions, given the high importance of this information to investors in current market conditions.

The FRC recently announced that the initial review is now complete and that 22 companies out of the 30 have improved the overall quality of their impairment information compared with the previous year.

It also said that there was a noticeable increase in the level of compliance with the requirements of IAS 36 generally, particularly relating to disclosures of reasonably possible changes in assumptions that could trigger an impairment charge.

The panel will conduct a more detailed review of the impairment information disclosed by the remaining four companies and will write to them when that exercise has been completed. The FRC stressed that despite selecting four sets of company accounts for further review, this does not mean that their accounts failed to comply with the requirements of IAS 36.

“We hope that many companies will be looking at their peer group disclosures and will be seeking to improve their goodwill and intangible asset disclosures which are so relevant at present”, said Ian Wright, head of corporate reporting at the FRC.