Evidence Of Long-Lived Asset Impairment Reversals From The Listed Company In China

In 2001, implement of the impairment of assets that include eight items were required by the Ministry of Finance in China. Also, asset write-down reversals were allowed without much restriction if specified terms were met. It has been six years till the New Accounting Standards are affective in 2007. During this period, reporting incentives have dominated managerial reversal decisions, which have brought about serious distortion in accounting information. For that reason, the New Accounting Standards were issued in Feb. 2006, which requires that any recognized impairment losses cannot be reversed.So what about the implementation of the impairment of assets by the listed company in our country in that period? Is the revision of 'Impairment of Asset' conforming to the actual conditions of our capital market? Why cannot the recognized impairment losses be reversed, is it effective in reducing the wide-spread price management now? Will it improve the quality of accounting information?To find out the answers, it begins with introduction of theoretical basis of assets impairment, the feature of new accounting standard and the background of the revision of the new standard on 'Impairment of Asset'. Then analyze the relationship between impairment of asset and the earning management and analyze the dilemma in the policy that recognized impairment losses can be reversed or not. Then we raised influencing factors of the implementation of impairment of asset. In empirical research, this paper statistically analyzes the implementation of the reverse of impairment losses in the listed company, compares the features of implementation with the non-implementation sub-sample, and the reverse from gain to loss of the listed company if recognized impairment losses cannot be reversed before 2007. Then we build a regression model to analyze the factors of implementation of the reverse of impairment losses. Finally, according to the result and relevant theory, as well as specific conditions of our country, provide some appraisal and comments on the new policy. 2006 is the last year that asset write-down reversals were allowed. This paper will do some special research in the implementation of it. Taken together, our results show that the accounting mode base on the conservatism principle would be more suitable to our country. The conclusion supports the new provision that any recognized impairment losses cannot be reversed.