Asset Impairment Regulations
نویسندگان
چکیده
We analyze a setting in which entrepreneurs acquire and develop assets before they learn whether they will be forced (by liquidity constraints or intergenerational concerns, for example) to sell their assets. The asset resale market suffers from a "lemons" problem because entrepreneurs who are not compelled to sell their assets may elect to do so opportunistically. In principle, impairment regulation of the type mandated by FAS 144 can help to mitigate the lemons problem. We analyze the optimal design of asset impairment regulation, and examine the extent to which optimal regulatory policy coincides with and differs from the requirements in FAS 144.
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