IMPAIRMENT OF ASSETS AND CAPITAL STRUCTURE OF LISTED MANUFACTURING COMPANIES IN NIGERIA

Abstract

This study examined the relationship between impairment of assets and capital structure of listed manufacturing companies in Nigeria. It’s focus is on how the impairment of both tangible and intangible assets impact on the capital structure of listed manufacturing companies in Nigeria. The population of the study consisted of listed manufacturing companies in Nigeria that account for impairment in their financial statements. The method adopted was based on percentages of impairment losses to either retained earnings or revaluation reserves. From the study carried out, the result showed that there is a significant relationship between impairment of assets and capital structure of listed manufacturing companies in Nigeria. The result also revealed that there is no significant relationship between impairment of assets and debt component of the capital structure. Based on the result of this study, it was recommended that companies should ensure that they regularly conduct impairment test for their assets as this significantly affect the capital structure. Also, companies should account for impairment of assets in line with the provision of IAS 36 and adequate disclosure made in respect of the impairment losses recognised in profit or loss and revaluation reserve as this significantly affects the capital structure. Furthermore, companies should also disclose any amount of impairment losses reversed into the statement of profit or loss or revaluation reserve and reasons for such reversals should be disclosed as this affect the capital structure. Accounting policy adopted by companies in accounting for impairment of assets should be disclosed and consistently applied. Finally, since impairment of assets has significant impact on capital structure, companies are to pay special attention to possible impairment indicators