Research On Chinese Listed Companies' Application Of Asset Impairments Allowance

With the complex of economic circumstances and the advance of science and technology, asset impairments of the company are already existed and generally concerned. To assure the accounting information true and reliable, and present useful information for the user of the accounting information to make correct decisions, in 2001, Ministry of Finance issued "Accounting Guidelines for Enterprises". It prescribes the extracting scope and limiting condition of asset impairments. Then, how about the situation of Chinese listed companies' application of impaired assets at present? Are there some regulations? What factors will affect the behavior of Chinese listed companies' application of impaired assets?Firstly, we use the standard research method to discuss the basic theory of the accounting of asset impairments in this paper. It systematically discusses the recognition, measurement, record and disclosure of asset impairments. Then, we appraise the asset impairments policy used in china and point out the insufficiency. Secondly, we describe the application of asset impairments of listed companies of manufacturing industry in Shanghai Stock Exchange between 2004 and 2006 by using Description Statistics and Distribution Test. Based on the analyses, it indicates: The extracting radio of impaired assets of most companies wasn't high, it is between -1% and 1% , but there are some extraordinary companies; The inferior companies' use of impairment allowance for earnings management was obvious. Some inferior companies whose earnings is loss before using asset impairments will switch back asset impairments to obtain earnings. Other inferior companies will make a "big bath" to make preparation for the next year when they can't obtain earnings by switching back asset impairments; The listed companies prefer to extract asset impairments allowance on the assets whose liquidity are good. Almost all the listed companies extract bad debt provision. This reveals that these assets are inferior. At last, we make deep analysis of the origin which causes the inappropriate behavior of application of asset impairments allowance and find that the reasons are: the flaw of present asset impairments policy, the low development of Asset Appraiser and Certificate Public Accountant, the dualism of government supervising, bad company government mechanism, weak internal control, bad comprehensive quality of the companies' accountants etc. In view of these reasons, we propose some countermeasure suggestions which further regular the listed companies' behavior of application of impaired assets.