An Empirical Research On Chinese Listed Companies' Earnings Management For Rights Offering By Means Of Allowances For Impairment Of Assets

Chinese companies prefer rights offering because of their unique organization structure. Corporations have strong motivations to manipulate ROE in order to get rights offering by means of Allowances for Impairment of assets in China. This paper is about how companies manipulate profit for rights offering after. The author focuses on their manipulating ROE through Allowances for Impairment of assets after the changes of accounting policies in 1999. Given consideration to different asset accounts (mainly inventories and accounts receivable), this paper also gives proofs to the conclusion that Chinese companies manipulate ROE by means of allowance for Uncollectible Accounts. At the end in addition to giving some ideas to the foundation of Chinese accounting principals, the author reviews the history of allowances for impairment of assets and its development both abroad and domestically, meanwhile discusses the measurement and recognition of allowances for impairment of assets.