The Relationship Of Asset Impairment And Accounting Conservatism Under New Accounting Standards

The original intention of provision for impairment of assets is to remove the bad components in the assets of enterprise,which reflects the real value of assets more realistic.However,a large number of studies in recent years show that the policies on impairment of assets have become a powerful tool for listed company to manipulate profits.The implementation of accounting conservatism becomes the protection of the profit control.We can't denied that to some extent accounting conservatism guarantee the quality of accounting information.But with the development of domastic capital market,the accounting target shifts from delegation-duties view to decision-usefulness view.The contradictions and limitations of accounting conservatism seems more and more obvious.Consequently,the new accounting standards issued in 2006 shows the trend of weakening accounting conservatism,especially the new asset impairment standands.The aim of this essay is to test how the implementation of the new assets impairment standards will affect the accounting conservatism.Based on the above ideas,taking the Shanghai and Shenzhen A-share companies from 2003 to 2007as the sample,the essay selected the Basu model to verify the changes in accounting conservatism of listed companies in China during this 5 year. Then build the accounting conservatism- impairment proportion relationship model based on Felham net assets underestimation model,in order to verify the relationship between impairment of assets and accounting conservatism.Finally try to illustrate how the accounting standards of the assets impairment affect accounting conservatism in statistical method.The results of this essay states:firstly there still exist accounting conservatism after the new accounting standards implement.But compared with the old accounting standards,it declined.Secondly the implement of new accounting standards of assets impairment do affects accounting conservatism more deeply and caused the decline of it.Thirdly the implement of new accounting standards limits the long-term asset impairment provision to some extent.But meanwhile,short-term asset impairment provision arised,which means that the new impairment of assets still leaves the space for the earnings management.