The Boom Of Industry, Internal Control And Assets Impairment

Using assets impairment for adjusting profits of listed companies has been an important means of earnings manipulation. In recent years, we are concerned that many listed companies have the phenomenon of assets impairment, the emergence of assets impairment is the result of internal and external factors working together. The macro environment is composed of industry environment. On the meso level, the boom of industry is closely related to enterprise behavior. On the micro level, enterprises establish a sound internal control in order to ensure the safety of assets and reliability of financial statements. Even in the case of the industry downturn, internal control should also play a role in weakening the negative impact of unfavorable environmental factors on enterprises assets.In this paper, we use2009-2012A-share listed companies as the research sample, employed theoretical analysis and empirical examine the impact of the boom of industry and internal control on assets impairment, found that the company’s assets impairment ratio was significantly higher than other companies when the company is in industry downturn, description that assets impairment reflect the change of the boom of industry to some extent, and it is a true reflection of the company’s future performance; The company’s assets impairment ratio was significantly lower than other companies when the company have a high quality of internal control, description that internal control have played its role to ensure the security of assets; There is a complementary effect between the impact of the boom of industry and internal control on assets impairment, and this effect is highlight in long-term assets impairment model, show that higher quality of internal control can weaken the adverse effects that the industry downturn brings to long-term assets, that is also mean internal control is more provision for long-term assets impairment than short-term assets impairment. In addition, we also found that the impact of economic motivation, earnings management motivation and the financial risk profile on different types of assets impairment is different. Although the "purges motive" was not obvious after the implementation of the criterion, some companies appear more ready to take advantage of current assets impairment to earnings manipulation. Therefore, in order to effectively regulate corporate’s assets impairment policy, improve companies response to adverse internal and external environment pressure, companies should make efforts from multiple perspectives, for example, gradually improve and implement internal control, further improve the accounting standards of assets impairment, improve the occupation judgment ability of accounting personnel, to ensure the objectivity and scientificity of assets impairment etc.