FRRP to crackdown on impairment disclosures

Bill Knight

Companies with substantial intangible assets will find themseleves under the spotlight for their impairment disclosures as the financial crisis continues to bite.

The Financial Reporting Review Panel said it intends to review impairment disclosures in 2008 accounts and will notify a number of listed companies in advance that their accounts will be subject to review.

The body said that it was 'unusual' to notify companies in advance that their accounts will be subject to review, but these were 'unusual times.'

'Companies should review their assets for impairment when they draw up their accounts and this is particularly important during an economic downturn. The companies selected for review by the panel have substantial intangible assets and may be looked to as illustrating best practice.'

'The panel aims to encourage reporting of the highest standard, not to catch people out, and in this difficult economic climate it seems fair to warn these companies that the extent and clarity of their impairment disclosures, and the assumptions on which they are based, will be subject to scrutiny,' the FRRP said in a statement.

After the review, the panel will write to the companies again either setting out any additional information or clarification it needs to determine compliance with the law or advising that there are no matters that it wishes to pursue.

The FRRP stressed that although it is notifying companies in advance on this occasion about the reviews, it will not necessarily do so in the future.

Bill Knight, Chairman of the Panel, added: 'The adequacy of impairment disclosures, their extent and clarity and the assumptions on which they are based, are of key interest to users of accounts prepared during a severe economic downturn. It is not the Panel’s aim or practice to catch people out. We think it fair to inform the companies concerned of our approach.'