Financial Assets Classification, Presentation Of Other Comprehensive Income And Earnings Management

Following the previous new accounting standards issued by China's Ministry of Finance in2006which required the disclosure of "comprehensive income" in the statement of changes in owner's equity, Accounting [2009] No.8issued in June2009which was about the issuance of the Accounting Standards for Enterprises No.3issue of the notice explained that "other comprehensive income" items and " comprehensive income" are to.be added to the income statement under "earnings per share". Combined with the income statement reform background, the paper is written to study the relationship between other comprehensive income presentation and earnings management, which has put emphasis on financial assets available for sale in order to verify whether other comprehensive income presentation has effectively curbed corporate earnings management to some extent. In the paper,726listed companies between2008and2009from Shanghai A shares are selected into a multiple regression model, followed by an empirical analysis. Finally the study drew conclusions as follows:, the larger the proportion of financial assets to total assets, the more likely corporate manager will be identify it as financial assets available for sale, not the trading of financial assets; The ratio (PAFS) of financial assets available for sale is not correlated to YEAR significantly, the reasons of which may be due to two reasons as follows:firstly, as far as the enterprise level is concerned, the majority of our listed companies still keep an eye on net profit for performance evaluation, and net profit is still the enterprises focus, while comprehensive income has not yet captured the companies'attention in performance evaluation system; Viewing from the investors, corporate financial statements presenting operating results and cash flows are always the most convenient and efficient way for the investors to get better understanding of business performance and financial conditions. Particularly, net profit is what small investors value most, which ultimately determines their investment decisions, so the comprehensive income has not yet caused enough attention of investors, leading them to play'tricks'on the net profit according to their demand. Owing to the two reasons above, presentation of the comprehensive income in the income statement has not played an important role in the inhibition of earnings management as expected.