A Case Study On The Earnings Management Of Letv

Since the concept of earnings management has been proposed,it has been often studied and discussed in academic and practical circles.As the competition in China’s capital market becomes more and more intense,the issue of earnings management is also widely existed among listed companies in China.Due to earnings management will manipulate the investors,and information cannot reflect enterprise business performance fair,investors cannot accurately measure the value of corporate and their interests may be damaged.Even at the same time,some means of earnings management may bring huge risk to the enterprise in future operating process.Therefore,to identify and prevent the surplus management is very important.Letv is the first domestic listed company in the Internet video industry.Listed at the beginning,the profits were soaring,Letv even was called a miracle because of booming in performance.But now a shortage of capital chain,at the same time due to liquidity storm impact,company’s reputation and credibility suffers doubt,income significantly declines,even the normal operations of the existing become problem,management need to change future strategic planning significantly.To sum up,letv is fully researchable and representative.This paper adopts the case study method and chooses letv as the research object.This paper studies the basic financial situation of letv and based the results to analyze the motivation of earnings management.In this way,the earnings management methods adopted in the operation of letv network in recent years are further explored,which are summarized as follows:1.Letv inflated the value of intangible assets through the selection of amortization methods of intangible assets and the provision of bad debts;2.Deal with r&d expenditures at a high capitalization rate;3.Less provision for bad debts of accounts receivable;4.Its huge deferred income tax assets make the enterprise’s income tax expenses negative year after year,thus improving the net profit;5.Rely on the profits and losses of minority shareholders to apportion losses so as to make the net profit of the parent company positive;6.Establish Letv e-commerce to share terminal business losses;7.Used the group’s network to conduct very complex related party transactions.Although these earnings management behaviors made the net profit belonging to the owner of the parent company positive,but it’s not fair and not real.The true earnings quality becomes poor in gradually,and the quantity of accounts receivable that are not high in quality is huge.Such earnings management behavior will make business in the future operate with a big risk.Finally,according to the enlightenment brought by Letv’s case,the paper puts forward corresponding suggestions on preventing earnings management.