A Study On The Recognition Of Deferred Income Tax Assets In Chinese Enterprises From The Perspective Of Profit Manipulation

Chinese accounting standards 18(CAS 18)stipulates that enterprises should account for differences between tax differences and confirm deferred tax items,so that the concept of asset liability gradually penetrate into the daily business activities of each enterprise.CAS 18 improves the original income tax accounting model and optimizes the quality of corporate financial information,but it still has some shortcomings.For example,CAS 18 stipulates that enterprises should consider deductible temporary differences as a future revenue of the enterprises.When the temporary difference can be deducted in the future,the enterprise should recognize deferred income tax assets.However,CAS 18 does not specify the recognition of deferred income tax assets,and only requires enterprises to consider the possibility of future taxable profits,providing enterprises the opportunity to manipulate profits.So,are there any trends and behaviors of Chinese companies using this loophole for profit manipulation?Based on this,this paper uses the method of statistical analysis and case study to study the deferred income tax assets of listed companies in China from the perspective of profit manipulation.Specifically,the statistical analysis method is used to analyze the status quo of deferred income tax assets of listed companies in China.It is found that deferred income tax assets have become an important part of corporate financial data and the use of deferred income tax assets to conduct profit manipulation has become a common case.Then take Zhangzidao Co.,Ltd.as the object of study,this paper analysised the amount of the deferred income tax assets,the impact of the company’s financial statements and the financial indicators,pointed out that Zhangzidao company does exist using the deferred Income tax assets to conduct profit manipulation and the behavior of the company’s financial statements and financial indicators have a great impaction.Finally,based on the statistical data and case analysis,this paper points out the reasons for the profit manipulation of deferred income tax assets and puts forward corresponding countermeasures.The results of this paper are as follows:(1)China’s listed companies tend to over-confirm the deferred income tax assets,proved that China’s listed companies use deferred income tax assets for profit manipulation of the suspect.(2)Deferred tax assets have become an important part of the financial data of listed companies in China and have a large proportion of total assets.It is important to confirm whether compliance is essential to the quality of financial data.(3)In 2014,Zhangzidao Company objectively confirmed large deferred income tax assets,which reduced the amount of statements in the year,and optimized the financial statements and profitability and solvency indicators.Case studies show that Chinese enterprises do have the use of deferred income tax assets profit manipulation which had a greater impact on its financial data quality.(4)The reasons for the profit manipulation of enterprises through deferred income tax assets are mainly due to the fact that the income tax accounting standards are not clear,the third party audit supervision is ineffective and the enterprise financial workers abuse the professional judgment,and it is suggested that should be addressed from these three aspects.