Research On The Value Relevance And The Change Of Long-term Assets Impairment Accounting System

On February 15, 2006, China issued Accounting Standard for Business Enterprise No.8:Asset Impairment Accounting (CAS8). In order to provide more true and useful information for accounting information users, the CAS8 used a single standard to regulate the question of long-term assets impairment by drawing on the experience of the FASB and the IASB, which unified accounting policies, judgment standards and disposal thought of long-term assets impairment, and which laid down more detailed regulations compared with the former standard in recognition, measurement, disclosure and so on. However, the CAS8 made it clear that company can't reverse the long-term assets impairment once the impairment is recognized. This regulation is conducive to restrain corporation using impairment provision and reversal to do profit manipulation, but denies the impact of the economic factors on asset values, making an important difference in the accounting standards of China and International Financial Reporting Standard. Therefore, whether the revolution of long-term assets impairment accounting system can achieve its original intention to improve the quality and usefulness of accounting information? and whether the regulation that prohibiting reversing the long-term assets impairment is reasonable?These problems are the contents to be studied.Based on the analysis of accounting objective theory, efficient market theory, accounting information mechanism theory and related theory of asset impairment accounting, this paper examines the total impact of the change of long-term assets impairment accounting system on the usefulness of accounting information by using value relevance research methods from the standpoint of the investors, where panel data of A-share listed companies before and after the implementation of the CAS8, serves as research object. At the same time, this paper examines the usefulness of accounting information of long-term assets impairment reversal, evaluating the reasonability of prohibiting reversing the long-term assets impairment.In this study, we found that accounting information of long-term assets impairment has the value relevance before the implementation of the CAS8, but it does not have the value relevance after the implementation of the CAS8. This paper analyzes that prohibiting reversing the long-term assets impairment is the main reason for accounting information of long-term assets impairment having no value relevance. So we further examine the value relevance of accounting information of long-term assets impairment reversal, and found that accounting information of long-term assets impairment reversal has value relevance. The empirical results show that the CAS8 prohibits reversing the long-term assets impairment, which can restrain the short-term behavior that some listed companies use impairment reversal to do profit manipulation and ensure the reliability of accounting information in a certain extent. But the regulation denies the impact of the market factors on asset values, not according with definition of assets and assets liabilities perspective, going against the accounting objectives of decision usefulness perspective, for which loss of the relevance of accounting information is the price to pay. The expense does not achieve the mission to improve the total usefulness of accounting information by the regulation, but the value relevance of accounting information of long-term assets impairment becomes worse. Therefore, this paper opines that the regulation of prohibiting reversing the long-term assets impairment not only damage the usefulness of accounting information, but also weakens the effect upon the revolution of long-term assets impairment accounting system. Moreover, it results in an important difference between the accounting standards of China and International Financial Reporting Standard, not matching the pace of continuous convergence between the accounting standards of China and International Financial Reporting Standard.Accounting to research results, this paper suggests as follows: (1) perfecting the regulation of the long-term assets impairment reversal; (2) perfecting internal guarantee mechanism on the implementation of the CAS8; (3) improving external environment on the implementation of the CAS8.