Does the Mark-to-Model Fair Value Measure Make Assets Impairment Noisy?

A strong trend towards the implementation and use of International Financial Reporting Standards (IFRS) changes the accounting reporting model and replaces cost-based measures with market-based measures. Based on the decision-making usefulness, the fair value has become a dominant measurement paradigm. However, among the three levels of the fair value hierarchy, the most controversial is the third one: unobservable inputs for the asset or liability. Regarding this level, fair value is estimated based on management's expectations and projections. This method of fair value measurement is susceptible to manipulation, having poor verifiability and, therefore, poor reliability. This has raised the question: does the implementation of the mark-to-model fair value measures for asset impairment tests enhance the relevance and reliability of information in the financial reports? After a systematic literature review and a synthesis of high-quality contributions in this field, we conclude that the implementation of asset impairment tests which use mark-to-model fair value measures has not increased the quality and reliability of the information presented in financial statements; unfortunately, research has shown that companies are using that tool to manage their earnings and promote managers' unethical behaviour. Furthermore, capital markets' reaction to asset impairment announcements is negative