A Study About The Impact On The New Accounting Standards To Earning Conservatism

Accounting standards is the basis of accounting information, and the initial screening process of information which access to accounting information system. Accounting information is the products of accounting standards. Thus, accounting standards determine the content and quality of accounting information directly. Conservatism, as one of the characteristics of accounting information quality, has an important impact on the presentation and disclosure of accounting information. The new accounting standards issued on Feb.15th 2006 was another profound change in the history of the accounting standards, which meant the building of accounting standards in China has reached a new stage. The new accounting standards continue to take conservatism as one of accounting information quality features. At the same time, it allows confirming the temporary economic benefits, such as the use of fair value measurement. From the conservatism point of view, the results of new accounting standards might be verified, which has significant influence on accounting standards in China's reform and improvement of the supervision of securities markets.From the review of the conservatism literature, focused on the analysis of the conservatism, illustrates the main factors of conservatism is accounting standards and systems in China. The principle of conservatism is contained in the pasted accounting standard. In order to test the existence of conservatism before and after the implementation of new accounting standards and the impact of the new accounting standard on conservatism, this paper selected SSE A-share listed companies 2005-2008 as the study sample. The accounting cumulative non-operating accruals, accruals– cash flow model and the revised earnings- stock returns model can be used to measure conservatism. The innovation is doing research on the characteristics of conservatism during two years, which new accounting standards had issued. While, taking the fluctuations in the stock market during the study period into account, use the revised earnings-stock returns model to test conditional conservatism.Study reached the following two conclusions: Firstly, the earnings of listed companies in China generally have conservatism during 2005-2008. This shows that the new accounting standards are one of the characteristics of accounting information quality. Secondly, the new accounting standards weakened the requirements of the conservatism principle. Accounting conditional conservatism in Listed Companies of China declined, which confirmed the introduction of fair value, the timely recognition of economic benefits, to some extent, make the earnings conservatism decline. The new accounting standards, in essence, are with convergence of the international accounting standards. Accounting information emphasize the "true and fair ", which shows the effect of the implementation of the new accounting standards. However, high-quality accounting standards are necessary condition for high-quality accounting information, but not the sufficient condition. Improving the quality of accounting information, not only have high-quality accounting standards as its formation mechanism, also need the relevant legal and security regulatory measures'improvement as its protection mechanism.