Earnings Management Studies Under The Current Asset Impairment Criteria

In the process of rapid development of securities market in China, the relevantregulatory authorities issued a series of rules and standards to improve the quality ofaccounting information. At the same time, our asset impairment policy has also beenimproved and perfected constantly. But due to the particular operation of asset impairmentaccounting, it has become one of the most popular means of earnings management in listedcompanies. This phenomenon was increasingly severe in recent years, affecting theauthenticity of assets and operating performance, causing the damage to the investors’interests, so asset impairment caused the wide attention of accounting professionals. OnFebruary15,2006, National Ministry of Finance issued a new enterprise accountingstandards system. Although the No.8Asset Impairment Criteria has made largermodification and improvement on withdrawing and returning the impairment, there are stillmany disputes on whether it can play a positive role on inhibiting earnings managementbehavior and lead to other forms of earnings management or not.This article starts with the concept and related theories of asset impairment andearnings management, and then studies the necessity of asset impairment provision and themotivation of earnings management, and the relationship between them. Based on thetheories above, it analyzes the current situation of using asset impairment to earningsmanagement in listed companies, laying the root for the empirical analysis. In empiricalanalysis, there are three main contents. The first one is descriptive analysis, mainlydescribes the behaviors that listed companies withdrawing and returning the impairment;The second one is independent sample T test whose role is to compare the samplecompanies in different motivation with the templates. The third one is multiple linearregression analysis, using the specific accrual models to analyze the current assetsimpairment and the long-term assets impairment. Finally, the article come to the conclusion that the current accounting standards plays a positive role on inhibiting theearnings management, but there are also some shortcomings that need to be improved.Besides, the effect of provision that banning long-term assets impairment returning is notsignificant, and also didn’t change the way of earnings management, returning thelong-term asset impairment is still the main measure to adjust the profits. At the end of thearticle, aiming at how to solve the problem of the use of asset impairment for earningsmanagement, the article puts forward some suggestions, such as perfecting the assetimpairment policy, improving the overall quality of accounting personnel, improving thetransparency of information disclosure and so on.