Research On Problem About The Profit Manipulation Used Allowance For Impairment Assets In Chinese Listed Companies

With the development of economy, accounting for impairment of assets has become the central issue concerning the regulation of accounting system in China, owing to the increasing change in the economic environment that the enterprise are involved in. The regulation of accounting is expected to reduce the information asymmetry and to provide the investor with valuable decision-making information. Ministry of Finance has formulated a series of accounting polices on impairment of assets, so that the quality of the enterprise assets can be truly reflected. However, according to the annual reports of the listed companies in recent years, accounting polices on impairment of assets is adopted by the listed companies as a tool for profit manipulation.The paper used both regular analysis and empirical analysis to study the problem about using allowance for impairment assets (AFIA) to manipulate profits, including theoretical background, empirical research, especially highlighting the empirical analysis on Chinese listed companies using AFIA to manipulate profits.In the regular analysis, based on the previous researches on AFIA, the paper introduced the related theoretical background, and as a basis for further empirical analysis, illustrated the way to account for AFIA adopted by companies that avoid loss, occur loss, reverse loss and make profits respectively.In the empirical analysis, from the perspective of the account of AFIA and its increase rate, the way to account for impairment allowance of individual asset, and the effect of accounting for AFIA on net profit. We make the empirical analysis on Chinese listed companies using AFIA to manipulate profits with four group samples. We testified that sample 1 companies would increase the AFIA in the loss year and reverse the AFIA in the loss-reverse year. The total AFIA had a positive effect on net profits. Sample 2 companies would still increase AFIA in the second loss year to facilitate reversing the loss in the next year. The AFIA of sample 4 companies has a little effect on the current net profits. From the perspective of individual impairment allowance, bad debt allowance followed by impairment allowance of inventory is the main form of AFIA. Impairment allowance of fixed asset and long-term investment gradually became a new...