Research On Problems Of Earnings Management Based On The Debt Restructuring Standard

The principle on debt restructuring was revised on2001and2006since its first issue in1998with the aim to regulate the debt restructuring activities in China. The revision has been on the accounting methods for the earnings form debt restructuring. In2006, the principle on debt restructuring was revised again in the mew general accepted accounting principle in China. The fair market value was introduced again and the earnings from debt restructuring should be reflected in the1998version. Although the issue of new general accepted accounting principle in2006reflected the convergence of the accounting principle in China with the international standard, the implementation of debt restructuring principle faced some issues under the unique environment in China. One of the issues is that companies will use debt restructuring to manage the earnings.Will listed companies use debt restructuring to manipulate the earnings? What is the interpretation from market towards the practice that earnings form debt restructuring can be reflected in current income statement? All these issues require our detailed analysis.The report will use a method combining theoretical analysis and empirical analysis. Companies listed in A share which happened to debt restructuring from2007to2011will be selected and grouped based on asset volume and industry, Data will come from annul reports. The discretionary accruals will be selected as dependent variable, reflecting how the company manages its earnings. Whether there is debt-restructuring activity and whether there is any intention to turn profit form loss are selected as explanatory variable. Multi-factor regression model will be constructed. The impact from debt restructuring activity towards the earning manipulation will be analyzed by descriptive statistics and multi-factor linear regression results. Whether the intention to turn profit from loss will impact the discretionary accruals will be further analyzed.The analysis shows that there is a positive relationship between the debt restructuring activity and discretionary accruals and there is a positive relationship between the intention to turn profit from loss and the discretionary accruals. This means that some listed companies are using debt restructuring to manage earnings.Finally, several policy recommendation are raised based on the empirical analysis, including control the source form regulating capital market and raised based on the empirical analysis, including control the source form regulating capital market and accounting principle, strictly regulate the manipulation activity and increase the efficiency from debt restructuring, as well as promote listed companies’sustainable development and stable growth of the whole capital market.