Comparative Studies On The Impact Of The Changes In Asset Impairment Accounting Standards For Earning Management In Listed Companies Under Special Treatment

The Asset Impairment Accounting Standards is a double-edged sword. Applied properly by listed companies, it can improve the quality of accounting information; on the contrary, it may become an accomplice of earning management by distorting accounting information and damaging investors' benefit. In recent yeas, since the Chinese negotiable securities supervision system has become much stricter, it's normal for listed companies to use accounting policy for earning management. Especially for listed companies under special treatment, in order to raise profits and avoid losses, they're more eager to do earning management, in which asset impairment is a tool.In order to prevent the phenomenon of earning management in listed companies, the Ministry of Finance in China issued new enterprise accounting standards, in which Enterprise Accounting Standards 8th-Asset Impairment requires that, any recognized impairment losses can not be reversed any more. This new accounting standard triggers a hot topic in accounting circles that whether it is effective to reach the anticipation of policy-makers, to improve the quality of accounting information, to reduce the wide spread earning management. The purpose of this paper is to answer such questions focusing on listed companies under special treatment.This paper illuminates relevant theories of asset impairment, analyzes the ways listed companies using asset impairment for earning management and compares IAS36, CAS8 and SFAS144 via theoretical analysis. This paper also uses statistical analysis to check the effect of the new Asset Impairment Accounting Standards for preventing earning management in listed companies under special treatment. The conclusion is that, listed companies under special treatment do have used asset impairment for earning management, but because of the changes in Asset Impairment Accounting Standards, they can only do it in one way, by using the impairment for the short-term asset instead of long-term assets. This means that, to some extent, new Asset Impairment Accounting Standards do suppress earning management of listed companies under special treatment. But it can not be denied that Assets Impairment is just one way of earning management which has become a history as the change of the accounting standard. There is still a long way to go for Chinese accounting regulations and standards, in the purpose of better controlling the earning management of listed companies. In the end, this paper provides some appraisal and comments on the new accounting standards.