The Empirical Analysis On Provisions For Impairment Of Intangible Assets Of Chinese Listed Companies

In China, the recognition of the impairment of intangible assets has been started since 2001. Accounting Standards for Business Enterprise: Intangible assets, which were issued by on 18th January 2001, required that intangible assets be measured at either book value or recoverable amount, determining by which one is lower, and allowed the reversal of provisions for the impairment of intangible assets. However, on 15th February 2006, the Ministry of Finance enacted Accounting Standard for Business Enterprise No.6: Intangible assets, and Accounting Standard for Business Enterprise No.8: assets impairment, which prohibit the reversal of provisions for the impairment of intangible assets.Prior Studies in China mainly studied the provisions for 8 items as a whole; and the researches for intangible assets limited in qualitative analysis. This dissertation focuses on the empirical and normative studies of the recognition and the write-off of provisions for the impairment of intangible assets, tries to find the motivations of earning managements between the recognition and the write-off, and explains that why Accounting Standard for Business Enterprise No.8: assets impairment terminate the write-off of provisions for the impairment of intangible assets.The dissertation have five chapters .Chapter One introduces the aim of the study and the framework of the dissertation. This chapter also reviews and comments the prior studies of the impairment of intangible assets. After the discussion of the definition and the perspective of intangible assets, Chapter two finds that the proportion of intangibles assets to total assets in China listed companies is small and continues to decline. Chapter Three examines the history of the accounting for the impairment of intangible assets, and finds that the accounting for the impairment of intangible assets is in line with the objective of financial accounting. Thus, the accounting for the impairment of intangible assets enhances the relevance of accounting information. After that, the accounting standards of the impairment of intangible assets are compared.We investigate the recognition and the write-off of provisions for the impairment of intangible assets among Chinese listed companies from 2001 to 2005, using an empirical approach. The result shows that Chinese listed companies use the recognition and the write-off of provisions for the impairment of intangible assets as facilities for earning management. Therefore, the prohibition of the reversal of provisions for the impairment of intangible assets will help to prevent Chinese listed companies from profit manipulation. Finally, some suggestions are given.