Long-term Effects Of Long-lived Assets For Impairment

After our market-orientated reform running through several phases, as well as the adoption of more flexible accounting systems, a problem begins to rise— do our public companies begin to select specific accounting policies to achieve certain purpose? That is to say, do the public companies conduct earnings management behaviors when they are confronted with alternative accounting policies? Aiming at more conservative reflection of the business values, in 2001, Ministry of Finance enacted assets impairment in the new "Accounting System for Business Enterprises", providing the first set of systematical rules for assets impairment accounting. An important question is raised: Whether the write-downs have reflected the perspective of the future profitability of long-term assets or they are just the behavior of earnings management.This paper use the data of listed companies in 2002,2003 and 2004 to do the positive research.We divide it into two parts to analyze the above elements.In the first part, We creatively uses the companies with minor losses as control group companies.This design is based on the assumption that the companies with minor losses tend to have the least motivation to manipulate the earnings.We compare three listed companies groups which were suffering great amount of loss ,close to "0 button-line" or aimed at allotment of shares with the control group in order to review the long-time domino offect of the rules for long-term assets impairment accounting. In this study, (l)the listed companies concentratively use write-down of fixed assets to manage earnings.(2) the companies that suffered great losses and companies that were close to "0 button-line" tended to use write-down of fixed assets to manage earnings.(3)there is no evidence supporting the companies that aimed at allotment of shares doing earning management. In the second part,we choose the companies which were suffering great amout of loss in 2002 as the sample and make tendency and comparison analysis.And the conclusion of the second confirms the first.