The Study On Earnings Conservatism

In February 2006, the accounting standards issued by Ministry of Finance achieved a convergence with the international accounting standards, and it was a great revolution of accounting system. The confirmation of accounting information changed from 13 principles to 8 requirements of accounting information quality. The conservatism was kept in this process, which showed the importance of conservatism in financial report. While the objectives of accounting standards not only paid attention to commissioned responsibility but also added the decision usefulness, and emphasized on the true and fair of accounting information. The adoption of fair value reduced the asymmetry of economic gain and economic loss which caused by conservatism. As a measure of accounting earnings quality, what change accounting conservatism will occur after the implementation of accounting standards? It would attract our attention.Based on the mentioned background, the article used empirical study and chosen all A share listed company data of Shanghai and Shenzhen Stock Exchange from 2005 to 2009 as the study sample, adopted Earning skewness and volatility measurement, Earning-stock return model and Accruals-cash flow model to study the existence and changes of earnings conservatism before and after the implementation of accounting standards. There are six parts in this article.The first part is "introduction". Introduce the research background, significance and the contribution of this paper.The second part is "review of literatures". The paper cards the two issues about the existence and measurement of accounting conservatism at home and board.The third part is "theory analysis and regulation circumstance of earning conservatism". The paper introduces the concept and classification of accounting conservatism, which includes conditional conservatism and unconditional conservatism. The paper emphasizes on conditional conservatism which also named earning conservatism. And then we discuss the factors influencing the earning conservatism, according to our national conditions, we point out that the transformation of accounting rules is the direct cause for existence and changing of earning conservatism. After that, we illustrate the representations of conservatism in accounting rules, especially the changes in accounting standards published in 2006, in which course there are strengthening and weakening points.The forth part is "research design". The paper discusses the model of Earning-stock return and Accruals-cash flow, including the applicability and calculation of index. The paper raises the following two hypotheses, one is the existence of earning conservatism and another is influences of earning conservatism caused by the accounting standards.The fifth part is "analysis and empirical test of the relationship between the accounting rules and earning conservatism". The paper tests the two hypotheses form descriptive statistics and regression analysis. The results show that: accounting conservatism existed from the year 2005 to 2009; after the implementation of the accounting standards, the conservatism of accounting earnings reduced.The sixth part summarizes empirical results and actuality of accounting conservatism and the paper gives some suggestions. In order to raise level of earnings conservatism, it not only needs the hard work of standard setters, but also needs the improvement of the institutions which breeds the demand of conservatism and optimizes the disclosure of accounting information. Only in this way accounting conservatism serves financial analysis and profits forecasts better.The contribution of this paper is using samples from 2005 to 2009 for the empirical analysis, based on accounting standards issued in 2006 background, and studies the influence of earning conservatism caused by the reformation of accounting standard systematically. Selecting the earning conservatism as the study point, the paper can observe the outside arrangement of rules greatly and offer statistical supporting and empirical analysis for. rules further reformation.Due to the restrictions of time and level, the paper has many shortages on design. The research on accounting conservatism is just at initial stage in China, many problems are worth analyzing deeply.