FRRP to crackdown on impairment disclosures

FRRP chairman

Bill Knight

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

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.’

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