Research On Earnings Management Of Long-Term Asset Impairment Of XXY Semiconductor Company

With the rapid development of China’s economy,there are many uncertainties in the internal and external environment of enterprises,as well as many risks and challenges in business management.The unpredictable environment also makes many managers embellish or beautify financial statements for their interests.Due to the particularity of long-term asset impairment,the provision of long-term asset impairment has become an important means of earnings management for many enterprises.Although the Accounting Standard for Business Enterprises No.8-Impairment of Asset issued in 2006 standardizes that once any loss if asset impairment is recognized,it shall not be switched back in the future accounting periods.This curbs the enterprise earnings management of long-term asset impairment to a certain extent,but still exists a lot of uncertainties relying on the mangers subjective judgement in the process of the confirmation and measurement of the impairment of assets according to the Accounting Standard,such as making a judgement on whether there is any sign of possible assets impairment or estimating the recoverable amount of the assets,which is strong subjectivity also gives managers a lot of opportunities for earnings management to harm the interests of outside investors.Under the above background,this paper chooses XXY Enterprise in the semiconductor industry.Semiconductor industry is asset-heavy,periodic and fast-paced technology,such as the long-term assets accounted for more than 70% of the total assets of XXY Enterprise.Therefore,this paper focus on the XXY Enterprise’s earnings management of long-term asset impairment.In recent years,as the country attach great significance to semiconductor industry,it has experienced a period of rapid development,XXY Enterprise as an outstanding company of semiconductor industry is also seizing the opportunity by merger and acquisition and huge investment.But this kind of irrational investment behavior,it also makes the more volatile fluctuation of provision of the long-term asset impairment(mainly goodwill and the provision of fixed assets impairment),which has a significant impact on enterprise operation as a key audit item for many years.This paper analyzed the operating conditions,the status of long-term asset impairment and the relationship between long-term asset impairment and earnings management from 2016 to 2020 by consulting domestic and foreign relevant literature and theories.Firstly,this paper evaluated the earning management level of XXY Enterprise by using the Healy and Jones modified model,and it was found that XXY Enterprise using the provision of long-term asset impairment for earnings management.The means of earnings management included untimely provision for goodwill impairment,less provision for fixed asset impairment,and not detailed disclosure related events of long-term asset impairment.Due to the company has suffered losses for two consecutive years,it has a strong motive of earnings management to "turning the losses into profits".In addition,the management has opportunity to modify profits due to frequent "turnover" in the short team,but the root behind it is the company’s blind investment and acquisition.It results in huge losses,unreasonable impairment process and internal control measures,low professional employees and etc.At the regulatory level,there are also reasons such as unclear standards and small penalties.These earnings management behaviors has caused abnormal fluctuations in its stock prices in the short term,and it has harmed the interests of minority investors.And it has harmed the value of the enterprise and lowed the level of asset management in the long term.In view of these questions of XXY Enterprise,in order to improve the status of long-term asset impairment and reduce the level of earnings management,this paper puts forward some feasible improvement measures and suggestions from the aspects of company,accounting standards,and regulatory systems,such as improving the management process of long-term asset impairment,strengthening the professionalism of employees,improving related regulations and the companies performance evaluation system of listed company,etc.