Empirical Study For Assets Impairment Of Listed Companies

With China's sustaining and rapid economic development, and with more demanding requirements of company law for the performances of listed companies, it is an indisputable fact that listed companies utilize impairment of assets to manage earnings. Excessive earning management provides conditions to achieve business objectives, whitewashes or covers up the company's operating results, misleads accounting statements users, and threatens the interests and financial security of creditor. In view of this, the formal implementation of the new accounting standards on January 1st of 2007 completed the compatibility of our accounting standards with the international ones, as well as a big revision on the relevant provisions of assets impairment in existing accounting standards. For example, it is clearly defined in the new standards that impairment of assets cannot be reversed once confirmed; adding the principles and regulations for procedures and methods on the asset group, the combination of asset groups and corporate assets; improving the requirements for the impairment disclosure.The implementation of the new standards will definitely have a significant impact on the accruing of the company's using the provision for impairment of assets and returning to control profits. Most previous studies, few of which made comparisons of asset impairment for listed companies before and after the implementation of new standards regulating asset impairment in 2007, focus on alone the cases that impairment of assets for listed companies accrues and switches back before the implementation of new standards, or on empirical tests of the impairment of assets and earnings management for listed companies. In this context, this paper, on the one hand, is making a normative research on the accounting of asset impairment theoretically; on the other hand, selecting ninety-seven companies in Northeast of China that are listed ones in the A-stock market as the research sample, it distinguishes between long-term assets and current assets, and comparatively analyses on the accruing and switching back of the provision for impairment of assets during the four years from 2005 to 2008 for the sample companies.The results from research show that, after January 1, 2007, the firms would not be allowed back to the previous yearly accrued provision for impairment of assets, so, in order to prevent the provision for impairment of previous assets that sacrifices the previous yearly profit from not switching back thereafter, in the last year before the implementation of the new standards-- 2006, listed companies switch back the previous accrued provision for impairment of assets on a large scale, which externalizes the way to eliminate profits by the provision for impairment of assets; The implementation of new standards plays a remarkable role in thwarting the companies'performances of controlling profits by the provision for impairment of assets in fixed assets, intangible assets and other long-term asset. However, due to lack of regulations on banning to switch back provision for impairment of current assets, the new standards are still needed improving and regulating in the earnings management of current assets.Meanwhile, integrating the results of empirical research, this paper offers related suggestions on improving new accounting standards, such as strengthening supervision of current assets for impairment reversal, perfecting information disclosure system of listed companies, intensifying training for accountants of listed companies.