Case Study On Impairment Of Assets And Earnings Management In Zinc Industry

For a long time,earnings management is a hot topic in academia.With the development of China’s market economy and the growth of the capital market,excessive earnings management of listed companies occurs from time to time,this has had a negative impact on the quality of accounting information.In order to control the excessive earnings management behavior of listed companies,the regulatory authorities have been revising and improving various systems,the space for listed companies to implement earnings management is gradually shrinking.However,making use of the provision for impairment of assets and transferring it back to manipulate profits is still one of the main means of earnings management for listed companies.The accounting standards for enterprises issued by the Ministry of Finance in 2006 have greatly revised the issue of asset impairment.One of the provisions prohibiting reversal of long-term asset impairment is to restrict listed companies from using the provision and reversal of long-term asset impairment to manipulate profits artificially.The new standard details the provisions on the provision and reversal of asset impairment.To a certain extent,it has curbed the enterprise’s earnings management by using asset impairment.However,enterprises can still carry out earnings management through the provision and reversal of impairment reserves for current assets.This paper adopts the research method of induction and case analysis.First of all,it sorts out and summarizes the relevant literature on asset impairment and earnings management at home and abroad.Then,the Zinc Industry shares as the research object.Analyze the company’s financial data from 2007 to 2017.To explore the relationship between asset impairment and earnings management.This paper analyzes the motivation,means and economic consequences of using asset impairment for earnings management.In order to avoid continuous losses and get rid of the risk of delisting,Zinc Industry shares.There are behaviors of earnings management by asset impairment in several years.The results show that asset impairment accounting involves a large number of professional judgments.It is difficult for regulatory authorities and certified public accountants to fully detect the manipulation of asset impairment by listed companies.At present,the provision and reversal of impairment reserves for current assets are still the main means of earnings management for listed companies,andgetting rid of delisting risk is the main motivation of earnings management of listed companies.Through the case study of zinc industry shares,this paper believes that the emergence of excessive earnings management behavior of listed companies.It is not only due to the management’s consideration of their own interests,but also due to the imperfection of China’s capital market system,the defects of asset impairment criteria and the lack of professional judgment ability of practitioners.Based on the current situation of earnings management of listed companies in China.This paper puts forward the following suggestions:(1)To further improve the exit mechanism of listed companies,to clear out the stock market in time those enterprises that do not meet the listing requirements,and to ensure the quality of listed companies.At present,only the single index of net profit is evaluated,which leads some listed companies to implement earnings management for various motives,reduces the quality of accounting information,and is not conducive to the healthy and orderly development of China’s asset market.(2)When evaluating the operation of listed companies,securities regulatory authorities should evaluate various indicators.In the future,a comprehensive evaluation should be made based on the actual situation of the enterprise and with reference to a number of indicators.(3)To further improve the criteria for impairment of assets and to specify the provisions on the accrual and reversal of impairment of assets.Constantly compress the earnings management space of listed companies and restrain the excessive earnings management behavior of listed companies.(4)Certified public accountants should strengthen their professional judgment while continuously improving their professional knowledge,increase independence,focus on enterprises with earnings management motivation,so as to curb excessive earnings management behavior.