Inco Ltd.: Market Value, Fair Value, and Management Discretion
通过Inco公司案例，研究管理层在资产减值决策中的自由裁量权，发现尽管市场证据显示资产被高估，管理层仍延迟减值，揭示了GAAP依赖未折现现金流导致账面与市场价值巨大差异。
ABSTRACT We examine management discretion to decide when and how much to write down an asset, in a unique case where a tracking stock provides an observable market value for the asset. We find that, despite market evidence that Inco Ltd.'s financial statements substantially overvalued the Voisey's Bay nickel mine throughout 1997 to 2000, management chose not to write down the mine until 2002. Inco management used an independent fairness opinion to justify its December 2000 redemption of the tracking stock at 25% of its initial value, indicating almost surely that Inco management was aware of the generally accepted accounting principles (GAAP) impairment. This case illustrates that GAAP's reliance on undiscounted cash flows for impairment decisions allows huge unrecorded disparities between book and market value. The management discretion exercised in this case provides a concrete example of the subjectivity inherent in fair valuation.