Accounting Research On Impairment Of Fixed Assets

In the market economy, the factors leading to asset impairment widely exist. The users of enterprise accounting information have to know about information concerning asset impairment for making correct decisions. The fixed assets is a significant part of an enterprise's long-lived assets, whose value fluctuation plays an extremely important role in the financial position and the operational results of an enterprise as well as the share price and profits in capital markets. This dissertation, through investigating and analyzing the problems relevant to impairment of fixed assets, hopes to be helpful to improve China's accounting criterion on asset impairment.On the basis of discussion of the theories on asset impairment, this dissertation probes into asset impairment accounting of fixed assets both from theory discussion and from case analysis.Comparing accounting criteria in China of fixed assets impairment with international accounting rules and financial accounting rules in the US, the following differences are found: unlike a series of combination as a profit-making * unit in an international enterprise, China's accounting criteria carry out impairment test for separate fixed asset, which possibly influences the pricing of fixed assets; the faultiness in China's capital markets and the relatively weak function in enterprise accounting management also impact the use of recoverable amount in impaired assets; China's regulations on the turning of fixed assets impairment are too general to operate; and oversimplified requirement on information disclosure of fixed assetsimpairment also aggravates the difficult for the users of financial statements to know about the assets of an enterprise.It is strongly recommended in this dissertation that China's accounting of fixed assets impairment could be improved through using for reference the foreign rules on fixed assets impairment such as a further partition of fixed assets, reinforcing and standardizing the use of recoverable amount, increasing the restrictions on the turning of fixed assets impairment as well as improving the requirements for information disclosure of fixed assets impairment.The dissertation processes a comparative analysis of depreciated, asset impairment and re-evaluation of assets, which are three forms of value fluctuation in holding and using fixed assets. It is clarified that these three forms are track and reflection of value fluctuation in fixed assets, and the application conditions and accounting disposal should also be completely different. It is pointed out in this dissertation, after analyzing the influence on the items concerned in the financial statements such as enterprise income tax and fee report forms in fixed asset impairment and its value fluctuation, that impairment accounting disposal of fixed assets will not influence the volume of required income tax in an enterprise but will affect its total asset amount and accounting profit.The author chooses financial reports of some listed companies since they planned in 2001 to draw fixed assets for provision for impairment to make a micro-study on the long-term influence of the accounting of fixed assets impairment on a separate enterprise or group. It is found that the fact that some listed companies reckon the huge volume of the first provision for impairment of fixed assets in the previous annual accounting by means of retrospective adjustment indeed dose not obviously impact the accounting profit in the same year, but will result in a reduction in depreciation expenses in the next years. Meanwhile, it is also found that an appropriate turning of fixed assets impairment to increase future annual accounting profits contributes prettification to the financial reports. Some enterprises draw a large amount of impairment preparation fund in the deficit year as the future secret reserve, which helps them ground in making up the deficits through theturning of asset impairment. Faultiness in the relevant rules in asset impairment in China is one of the important factors leading to an unsatisfactory asset impairment accounting performance in practice. Certainly, lag in financial administration in enterprises, poor quality of accountants and distemperedness of market system are also vital reasons working on the result of fixed assets impairment accounting in China.In short, the following suggestions are recommended in this dissertation to improve the rules and work of China's fixed asset accounting. In the beginning, outside supervision and administration should be reinforced. Rule-makers should further perfect the present rules on fixed assets impairment accounting to make them concrete rather than so general. Also, governments concerned, China Securities Regulatory Commission (CSRC), China CPA Association and the self-disciplining organs of listed companies should strengthen the administration and supervision of the implementation of this impairment accounting. Additionally, enterprises should improve their financial administration, for the transfer of China's accounting functions of enterprises from checking to administration chiefly depends on the improvement of the accountants in enterprises. At the same time, enterprises should base them on the financial staff and those financial software development institutions to actively develop and apply advanced financial administration softwares, so as to promote financial administration in enterprises and to acquire more accurate information of the value fluctuation of fixed assets more timely.