Research Of New Criteria On Assets Impairment Impacting On Earnings Management Of Listed Company

Earnings information as a measure of operating conditions of the listed company not only guides the investors to make correct evaluation, but also gives assistance to securities regulation. The reality of earnings information is directly related to the interests of investors, the rational allocation of social resources and the healthy development of the securities market. However, some listed companies intervene in external financial reporting for private gain. According to scholars’ studies, the counting and drawing of asset impairment has become an important means of earnings management operations.The study found that asset impairment accounting is a "double-edged sword", impairment of Assets policy impact accounting information of the company has a dual nature. It not only can reflect the company’s business and assets, but also may become a tool to make earnings management. In order to restrict the behavior of earnings managements, which use asset impairment and reduce the space of profit manipulation, the Ministry of Finance issued the <Accounting Standards for Enterprises No.8-Impairment of Assets> in February15,2006. New criteria on assets impairment made a greater adjustment, provided long-term assets such as long-term equity investments, fixed assets, construction in progress, intangible assets, goodwill impairment provision shall not be reversed once, investment real estate which use the fair value and trading financial assets are not considered to be impaired, other financial instruments and inventory are allowed reversal of an impairment loss of assets, which more detailed and clear in some of the problems. Due to the circumstances are complex and varied, the provisions of new guidelines asset impairment can not deal with all the actual situation. It also may lead to new earnings management means.In this paper, theoretical and empirical research methods were combined, In the theoretical part, summarized the results of previous studies and analysis the relationship between the impairment of assets and earnings management to lay a solid theoretical base for empirical research and hypotheses prove. Empirical part is based on the old and new criteria, research the listed companies trading in Shenzhen and Shanghai Stock Exchange Main Board A-share. Analysis of influence on earnings management behavior of the listing Corporation in China after the implementation of new accounting standards and non-current assets and current assets impairment provision of net earnings management behavior.Empirical results showed that:(1) after the implementation of the new criteria for assets impairment, current assets and non-current assets net charge for impairment of behavior are present in a variety of earnings management purposes. Therefore, we believed that listed companies in the avoidance and impairment of assets to meet the new standard requires the motivation for impairment of assets under construction with a "compliance" adjusted earnings management in order to achieve the purpose of the clear preference.(2)Listed Companies Non-current assets and current assets impairment behaviors are presented the incentives, such as turning losses into gains, smoothing profits and avoiding losses, and the new guidelines for the implementation of asset impairment is only valid to some extent, it can restrict the individual earnings management behaviors only. Therefore, the implementation of the new guidelines effectively inhibited, to some extent, impairment of assets of listed companies for the use of earnings manipulation behavior, but it did not block all the listed companies manipulate earnings gap.According to empirical results, this paper gives some suggestion to improve the implementation of asset impairment accounting of listed companies’internal and external conditions. By the ways of improving the corporate governance structure, strengthening the legal education and professional and ethical standards of accounting personnel to improve the implementation of asset impairment accounting listed companies’internal conditions; By the ways of constantly revising and improving asset impairment accounting standards, improving business performance evaluation system, perfecting the imperfect information market and price market, developing the independent auditing standards, strengthening the CPA audit and the relevant legal responsibility to improve the implementation of asset impairment accounting listed companies’ external conditions.