Research On The Effects Of Implementation Of Asset Impairment Accounting Standard From The Perspective Of Earnings Management

In order to reflect the quality of corporate assets objectively, pilot joint-stock companies had been required to make allowance for bad debts since 1992 in our country, and in 1998 all of the limited liability companies started to make allowance for bad debts, price-falling inventories, price-declining temporary investment and long-term investment. Three years later, all the listed companies were required to add the allowance of fixed assets, intangible assets, construction in-process and trust loans according to the business accounting system implemented in 2001. Until then, the number of assets that were required to measure the impairment loss had increased to eight. Researches shows that these standards had played an effective role in reflecting the quality of corporate assets, but they had also become one of the main means of listed companies' earnings management because of their flexibility. To prevent listed companies from using these standards to adjust accounting profit and to enhance the usefulness of accounting information, Ministry of Finance in our country promulgated Asset Impairment Accounting Standard on February 15,2006, which forbids the switch back of the allowance of non-current assets impairment:So far, Asset Impairment Accounting Standard has been implemented for more than three years. What about its impact on listed companies'earnings management? And has it reached the original intention of Ministry of Finance? To know that, this essay has done some research. And the essay contains five parts. Part one mainly summarizes and reviews the document. The second part chiefly introduces the theory of asset impairment and earnings management. And then the third part analyzes the effect of implementation of Asset Impairment Accounting Standard from the theoretical perspective. Part four is the most important one, in order to verify part three it analyze the impact of Asset Impairment Accounting Standard on listed companies'earnings management using experience research methods. Finally, the fifth part discusses the problems of the implementing of Asset Impairment Accounting Standard and puts forwards measures on this issue.The research shows that the listed companies inclined to manage their earnings by means of allowance of current assets impairment and so Asset Impairment Accounting Standard can prevent those companies from earnings management only to a certain extent. After all, the standard is just a system, and hard to be perfect. The key to contain the listed companies'earnings management is to improve the managers and accountants'professional ethics in the company.