The Reliability of Impairment Tests: The Case of Vessels

AbstractFor a shipping company the vessel is the most valuable and important asset. In most cases the value of the vessel is the bigger part of total assets. Under International Financial Standards and also US GAAP (IAS 36 and SFAS 144 respectively) entities are required to conduct impairment tests where there is an indication of impairment of an asset. It is of high importance that the assumptions and the methodology of these tests be right, in order the results of the test be valid. Always there is the risk that the accountant manipulate the test in order to avoid any impairment loses. Authors’ purpose is to examine the way that the results from these tests are related with market values. Also under what test assumptions the results from the tests close enough to market values of vessels