An Empirical Study On The Motivations Of Long-lived Assets Impairments Write-downs

This paper mainly discusses the earning management of listed companies by the long-lived assets impairments. Using the data of CSMAR 2003, this paper makes an empirical study on the motivations of long-lived assets impairments write downs.Compared with current assets, firstly, long-lived assets are more and employed longer, so the application of impairment policy has an enormous impact not only on the firm value but also on the performance of the company, secondly, when it come to impairment criteria in amount and time, long-lived assets are more intricacy and subjectivity than current assets in the process and it is More difficult to decide their fair value. So, It is worth studying that how the long-lived assets impairment Policy set out in the Accounting System for Enterprises has been implemented, what effect the retroactive Adjustment policy has had on the impairment of the listed companies .there have been some research on all eight impairment items,but it's very seldom for them to make a investigation on the four long-lived items singly, whether the write-downs have reflected the perspective of the future profitability of long-lived assets or they are just the behavior of earnings management? If the latter, whether the listed companies prefer to long-lived assets or current to do earnings management? It will be further studied in this paper.The main conclusions of this paper are followingsFirstly, The companies whose ROE were between 0 to 1% in 2001 tended to recognize less amount of long-lived assets impairment loss, and made a more retroactive than standard companies.Then, In order to be qualified to finance in stock market, The companies whose ROE were between 6% to 7% in 2001 had a less write-down loss than standard company's ,but out of expectation ,they made a more retroactive. In order to keep performance, the companies which finance in 2001 recognized less write-down of long-lived assets, the evidence proved true.There were no any signal difference between companies which finance in 2001 or 2002 and the standard companies.Last, The companies which suffered loss in 2000 but gained profit in 2001 tended to recognize less assets impairments, and made a more retroactive than standard companies. But the companies which suffered loss in 2001 but gained profit in 2002 didn't recognize more assets impairments loss. The companies whose ROE were less -20% made a big-bath.