The Revision Of Debt Restructuring Accounting Standard: Theoretical And Empirical Research

In January 2001, the Ministry of Finance promulgated or revised eight Accounting Standards for business enterprises. The revision of the Debt Restructuring Accounting Standard has important effect on the financial statements of listed companies.Important differences exist between the old Debt Restructuring Accounting Standards and the revised one. The revised standard required that the debtor should recognize the balance between the actual amounts of settlement and the book value of the debt in the capital reserves, rather than as the current earning. It does not coincide with the international accounting tradition, but in the opinion of the authorities responsible for accounting standards, the old one provided opportunities for some enterprises to increase profit and do harm to the capital market. The revised one is more suitable for our present market situation.Disputations rose from this revision. Some people think it will make the listed companies' income statement more pure, but others think the revised one disobeys the international tradition and conflicts with our existing accounting standard system. This paper will make further investigation on this issue, from both the theoretical and practical viewpoints, in order to evaluate this revision more completely and objectively.Through theoretical analysis and empirical research, this paper made following conclusion: Under the old standard, the debt restructuring behavior was close related to the companies' earning management; the revised standard is more suitable under our present situation. The announcement of this accounting standard revision has impact on the stock market. Besides, this paper also indicated that this revised standard has its demerits, the accounting standard for debt restructuring need further revising and consummating. Based on the conclusion, this paper also provided some policy suggestion. Therefore, this paper not only provides evidences from market to the authorities responsible for accounting standards, but also has value to the securities regulatory bodies.