Research On The Influence Of Listed Company Assets Impairment To Earnings Management

On February 15th 2006, China's Ministry of Finance released a new system of Accounting Standard for Business Enterprises, including a basic 38 criteria and a set of specific criteria. New accounting standards will be implemented on January 1, 2007 first in listed companies and will then be gradually extended to all companies.An new specific criteria is added in the 38 specific criteria ,which is Accounting Standard for Business Enterprises No. 8 - Impairment of Assets". This is the first accounting standards for impairment of assets in China, the new Accounting Standard provide for impairment of assets that, impairment of the eight four asset impairment were confirmed once, may not be back in the subsequent accounting period.The promulgation of new Impairment of Assets is followed by the principle of caution, in order to reflect the financial position and operating results more objectively. On the one hand, the implementation of assets restricted the conduct of earning management to some extent, there are indications that the provisions of the new impairment of assets is in line with China's actual situation, although be substantive differences with the international accounting standards, but it is in line with China's national conditions. On the other hand, despite the new impairment of assets can describe a number of issues more detailed and clearly, restricted the acts of the corporate accounting to a certain extent, but in the concrete application of the enterprise ,there is still left a certain space, which is provided an opportunity for the earnings management for senior managers. In recent years, from annual reports of listed companies, the asset impairment policy of listed companies has become a tool used to manipulate profits. Because of the excessive surplus of earnings management would undermine the reliability of the information, the impact of socioeconomic resources, to mislead the investors's decisionmaking, and have a negative impact on the long-term development of enterprises, therefore, how to improve the theory of the assets impairment, improve the specific accounting standard, limit the excessive behavior of earnings management effectively, become as a problem needed to resolve in the accounting theory and practice field.In this paper, on the aspects of the article "Impairment of Assets and earnings management" which were writed by Chinese experts is searched and researched ,with the starting point for the study that the relationship between the impairment of assets and earnings management, the extraction and back data before and after the promulgation of new guidelines for assets impairment, on the basis in the comparative analysis of the old and the new accounting policy for impairment of assets ,pointed out that the new accounting standards related to the prohibition of the reversal of impairment of long-term assets, blocked part of the earnings management channel of the listed companies. However, bad debts, inventory decline these two are still allowed to switch back, the new asset impairment accounting standards and other related still have space to be used for earnings management. Pointed out how to choose between maintain continuity and stability of accounting policies, accounting standards in the need to keep flexibility of space and restricted earnings management, is the most difficult decisions which the standard setters will be facing.In this paper, with the use of a combination of theoretical and empirical analysis, the use of the comparative analysis and empirical analysis,which to verified the positive role the existing accounting policy for impairment of assets played in the earnings management of listed companies ,and at the same time,it pointed out that the existing accounting policy for impairment of assets defects in the system lead to it has become an important means of the earning management in the listed companies. In the theoretical analysis part, First of all, this paper combine the results of research on behavior between the assets for impairment accounting policy at home and abroad, summed up the theoretical basis between the impairment of assets and the earnings management, and gave a simple description in the relationship between impairment of assets and earnings management.At the same time, respectively,describe the avoid losses companies,huge losses companies, turning losses companies, profitability and macth stocks companies's behavior and motivation on the aspect to deal with the assets impairment, combined with the comparison of the new standards with the old and the international standards, to verify the purpose and significance of the new standard-setting, and through the behavior and motives before analysis to reflect the new standards are still have problems, so as a basis for further empirical analysis.In the empirical analysis,because the new accounting standards will be implemented in 2007, as a result , 2006 will ever become the last year to return the impairment provision back to profit, which the domestic accounting industry generally guess that there will be a large number of listed companies return the impairment back action in 2006, and therefore choose the company profitable for three consecutive years from 2003 to 2005 to study as the samples, carried out T-test by the overall sample as well as the classification of carried out by descriptive statistical analysis, to verify prior to the implementation of new guidelines, profit company does exist smooth earnings behavior through the impairment of assets of companies, and reveals the way to smooth earnings. At the same time, for the issues of the empirical analysis reflected, in this paper ,then choose all the listed companies whose financial data before and after the implementation of the standard is complete as the samples, respectively, from the distillion for impairment of assets and the amount of back and prepare for the disposal of assets for impairment impact on net profit, in terms of listed companies on China's use of asset impairment to manipulate profits,so as to conduct the empirical analysis, proved indeed the new standard play an restricted role in earning management.This article focuses on the study that if there exist a large number of listed companies smooth the profit through the assets for impairment,for which profit during three consecutive years from 2003 to 2005 in 2006 financial reports, How they are prepared to carry out asset impairment smooth earnings? " The release of Accounting Standard for Business Enterprises No. 8 - Impairment of Assets," had an impact on earnings management of listed companies whether or not,and to produce what about kind of impact, as well as what is the problem after the implementation of the new standard will continue to exist? And make a sound accounting standards and accounting system, and improve relevant policies, laws and regulations, set up a reasonable business performance evaluation system and evaluation criteria countermeasures,and so on.