AAA Spark Meeting of the Regions

Are Current Disclosures Current? Evidence from Form 8-K Impairment Filings

• In Event: Corporate Disclosure Influences

Abstract

Form 8-K rules require firms to disclose material asset impairments (Item 2.06) soon after an impairment conclusion is reached. However, a limited safe harbor from the filing requirement is permitted if the impairment arises in connection with financial statements for the next periodic report, i.e., a Form 10-K/Q. This study investigates how often firms disclose asset impairments through Form 8-Ks relative to periodic reports. We find that only 8% of firms that ultimately disclose impairments through periodic reports also disclose the impairment currently on a Form 8-K during the applicable quarter. An investigation of this reporting practice suggests that the likelihood of disclosing Form 8-K impairments is affected by firms’ quarterly performance, opportunistic reporting incentives related to stock options and capital raising activities, as well as by their reporting environment, i.e., their analyst following and auditor type. Our findings highlight the rarity in which firms provide current impairment reports and offer novel evidence suggesting that management incentives affect the timing of Form 8-K impairment disclosures.

Authors

• Amanda Sanseverino, Manhattan College

• Jangwon Suh, Queens College–CUNY