Research On Accounting Standards Setting Based On Earnings Management

Earnings management is an action in which the enterprise's management deliberately adopts variety of methods to affect the accounting data especially the accounting earnings in order to achieve private benefit or maximize the value of enterprises on the precondition of compliance with accounting standards. Earnings management do not violet accounting standards apparently, it just using accounting standards flexibly to manipulate accounting numbers. With more and more earnings management cases emerging in capital markets, the setter of accounting standards suffered various doubts and press from public. Previous studies mostly focused on the conception, motivations and methods of earnings management which cannot afford valuable advices to standard setters. This thesis diverts its attention to accounting standards, one of the restrictive factors of earnings management. On the basis of building the theoretical framework for earnings management, the thesis researches the relationship between earnings management and accounting standards. First, the appearance of earnings management is not because of accounting standards but because of its own reason; Second, accounting standards can be a useful tool of managing earnings for its natural limitation; third, there is a long gambling between the two parties. At last, combines the issuance of the new standards on 2006, the thesis analysis its impaction on earnings management and proposes suggestions for the update of accounting standards of our country. On the one hand, high quality accounting standards is the key to restrict earnings management. On the basis of paying attention to the result the accounting standards impact on real earnings management, that is, tighter standards do reduced accounting earnings management, but it directly increases real earnings management and the related social cost, the paper declines that as an institute factor, accounting standards cannot only commit itself to constrict the earnings management, the most important is to improve production capability. If only it can do help to improve production capability, some space for managers to manage earnings can be accepted. On the other hand, high quality standard is a necessary but not a sufficient condition to high quality accounting information. Only depending on the improvement of standard is far away from high quality accounting information. In order to minimize earnings management, standard setters should pay attention to the implement of standards.