Empirical Study On Accounting Policy Of Asset Depreciation And Earnings Management

Using asset depreciation to adjust the profit is one of the tools of company's earnings management. The accounting policy of asset depreciation makes great effects on company's earnings management. The new policy of asset depreciation which is decreed in 2006, changed the way of long-lived assets impairments, defined that the depreciation of long-lived assets can not be reverted. Most of the studies on this topic were based on the old asset depreciation policy, and many of them studied on the loss listed companies. Therefore, to study on Asset Depreciation policy and Earnings Management based on the new accounting policy is very important.This thesis chooses the data of profitable companies in 2005 and 2006, use the Paired-Samples T Test to find the changes of company's earning management. In this thesis we get two main conclusions: Firstly, companies which got profit in both 2005 and 2006, reverted the long-lived assets depreciations or avoid new depreciation of this kind in 2006. Secondly, the depreciation of current assets didn't change a lot in 2006. Meanwhile, from the empirical study we found that profitable companies are lean to use the depreciation of fixed assets to adjust the change of the policy.This thesis includes five chapters. The first chapter is the introduction, introduce the articles'study background, significance, and the research method; the second chapter is the research overview and theory of the asset depreciation policy and earnings management; the third chapter is the method of the research, includes the assumptions and the tools of the study; the fourth chapter is the empirical study; the last chapter is the conclusions and suggestion.