1、PDF外文:http:/ THE EFFECTS OF PRIOR INVOLVEMENT AND ACCOUNTABILITY ON ASSET IMPAIRMENT DECISIONS Randall W. Rentfro Nova Southeastern University rentfrohuizenga.nova.edu ABSTRACT This study examines whether long-lived asset impairment decisions are biased when the decision ma
2、ker was also involved in the original decision to invest in the asset. In addition, the study tests whether accountability for impairment decisions attenuates bias in the judgments made by individuals who were involved in the investment decision. The theoretical bases for the studys research questio
3、n and hypothesis come from the accountability and escalation of commitment literatures as well as a psychological theory previously untested in the accounting domain, the Catastrophe Theory of Attitudes (CTA). The studys findings suggest that CTA may have potential to explain certain behaviors of ac
4、countants. Furthermore, accountability appears to mitigate bias stemming from prior involvement in the investment decision. INTRODUCTION This study examines (1) whether long-lived asset impairment decisions are affecte
5、d by decision-makers involvement in the decision to invest in the asset and (2) whether accountability for the asset impairment decision mitigates biases in the decision-makers judgment resulting from that prior involvement. The motivation for the study stems from the decision-making process require
6、d by Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets(Financial Accounting Standards Board, 2001). The decision-making process begins with the accountant scanning the environment for indicators of asset impairments. If the acc
7、ountant determines that an indicator is present, the accountant performs a recoverability test, which involves forecasting future net cash flows from the asset, to determine if the asset is impaired. If the test shows that the asset is impaired, the accountant writes down the asset to its fair value
8、. Throughout this process, the accountant must exercise significant professional judgment. As a result, the accountants asset impairment decisions may be affected by the accountants biases. This study looks at one source of bias suggested in the escalation of commitment literature: involvement in th
9、e original decision to invest in the asset. The escalation of commitment literature demonstrates that when an accountant is responsible for an investment decision, subsequent judgments made by the accountant concerning the asset may be affected. For example, the accountant will i
10、ncrease his or her commitment to a failing investment when given the chance (see, for example, Schulz and Cheng, 2002). Similarly, an accountants asset impairment judgments may be affected when he or she is involved in the investment decision. The accountability literature sugges
11、ts that, under certain conditions, accountability may attenuate bias(Lerner and Tetlock, 1999). If an asset impairment decision has a material impact on the financial statements, an accountants decision that an asset is (is not) impaired likely will be questioned by an external auditor. The accounta
12、nt must justify the decision, which is one form of accountability pressure (DeZoort, Harrison, & Taylor, 2006). This study considers whether justifying asset impairment decisions mitigates biases resulting from involvement in the investment decision. This study uses an experi
13、ment to examine the effects of involvement and accountability on long-lived asset impairment decisions. Participants in the experiment were asked to make a series of asset impairment decisions relating to an investment in an entertainment complex. The experiment uses a case setting to provide partic
14、ipants with information about the complex over a five-year period. The participants assessed the probability that the assets of the entertainment complex were impaired at the end of each year in the five-year period. The results of the study suggest that accountability atte
15、nuated biases resulting from prior involvement in the investment decision. In addition, the decisions made by participants in the involvement condition follow a pattern that is consistent with a psychological model of attitude formation and change: the Catastrophe Theory of Attitudes (Latane & N
16、owak, 1994). As a result, the study helps to link the escalation of commitment literature with a psychological theory which, up to now, has not been applied in an accounting domain. The remainder of the paper is organized as follows. The next section provides a brief summary of S
17、FAS No. 144. The third section provides a review of the relevant literature and develops the research question and the hypothesis examined in this study. The fourth section explains the experiment and is followed by a section presenting the results of the statistical analyses. The final section prov
18、ides discussion and conclusions. Recognition and measurement process for potential asset impairments SFAS Statement of Financial Accounting Standards No. 144 requires a three-step recognition and measurement process for potential asset impairments. In the first step, accountants
19、review an entity's operations and scan the environment to determine if any indicators of potential asset impairments exist. SFAS No. 144 provides examples of impairment indicators (see Table 1)； however, the Financial Accounting Standards Board (FASB) did not intend for the list of impairment in
20、dicators to be exhaustive. TABLE 1 Example Asset Impairment Indicators Statement of Financial Accounting Standards No. 144 (FASB, 2001) a A significant decrease in the market price of a long-lived asset (asset group) b A significant adverse change in the extent or manner in which a long-lived asset
21、(asset group) is being used or in its physical condition c A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator d An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group)
