Research On Earnings Management Of Public Companies With The Accounting Policy Of Assets Impairment

Accounting policy of Asset Impairment is a double-edged sword.Applied properly, it can improve the quality of accounting information,on the contrary it may become a tool of earnings management,affects the reliability and relevance of accounting information,mislead users of the accounting information to judge financial situation of public companies.For a long time,the Phenomenon of false assets and profits are common occurrence in public companies.All social circles have paid more attention to reality and accuracy of financial information.During the Period of Asset Impairment Accounting Standards implemented in china,Many public companies have use Accounting policy of Asset Impairment for earnings management,which have brought about serious distortion in accounting information.In order to prevent profit manipulation.The Ministry of Finance in China on Februaryl5,2006 issued 39 new enterprise accounting standards,Enterprise Accounting Standard 8^th-Asset Impairment was included,which requires that any recognized impairment losses cannot be reversed.Is it effective in reducing the wide spread earnings management now? Will it improve the equality of accounting information? These questions have become a focus point for accounting practice circles.This paper expounds the relevant theory about assets impairment,the motives and means of earnings management of public companies,on the basis of contrast the old and the new accounting standards,provide some appraisal and comments on the new policy.This paper use statistical analysis methods,confirmed the allowance for assets impairment which can be reversed are in the broad application.But one viewpoints of this paper is that the allowed reverse will not give rise to earnings management of public companies.In this regard,this paper make a distinction between the impairment for the long-term assets and current Assets,then use specific accrual models to judge both the earnings management before and after the implementation of New Accounting Standards.The empirical evidences show that:Before the implementation of the New Accounting Standards,public companies mainly use the impairment for the long-term assets for earnings management,and there is no apparent signs showing that public companies use the impairment for the current assets for earnings management;After the implementation of the New Accounting Standards,there are no apparent signs showing that public companies use both the impairment for the long-term assets and current Assets for earnings management. Thus,the new asset accounting standards will effectively prevent public companies from profit manipulation.