Research On The Impact Of Assets Impairment On Earings Management

In recent years, the dishonesty of earnings information in listed companies has became a social focus. The extensive existence of earnings management severely aggravated the quality of financial information. The modified earnings information is not able to fairly reveal the financial situation and operating performance, meanwhile, it makes the information less valuable in decision making and destroys the benefits of information users. Extracting assets impairment is to reflect the value of companies' assets, without inflating assets and profits, and to guarantee the authenticity and reliability of accounting information. But the flexible characters that the assets impairment theory possesses can satisfy various companies' objects for earnings management, consequently, it has been one of the most important tools for listed companies to adjust the earnings. In order to change the situation, Ministry of Finance released the new Chinese Accounting Standard system for business enterprises which included 1 Basic Standard and 38 Specific Standards on Feb. 15th, 2006. The new accounting standard will control the behavior of listed companies effectively while he is using assets impairment to earnings management.Domestic and foreign scholars have studied on assets impairment and earningsmanagement for many years. Most of the existing researches are based on the formeraccounting system or the social background of western countries, analyses the behavior oflisted companies using assets impairment to earnings management with the motivation ofearnings management. However , the study on assets impairment and earnings management islittle, in particular, the study on the effect of using assets impairment to earnings managementafter the implementation of the new standard is a blank. So the research of this paper has somepractical significance.This paper analyses the present situation of assets impairment and earnings management on the basis of the domestic and foreign status quo with the theory of the assets impairment and earnings management. This paper uses normative analysis and empirical analysis to find the problem of the assets impairment , and the common means used by listed companies while doing earnings management. Two of which, extracting and reversing assets impairment have greater effect on earnings management. This paper uses descriptive statistical methods to analyse the general extraction and reversal of assets impairment, as well as the influence to the balance sheet and the profit statement caused by the using of the ratio of assets impairment. In summary, this paper uses empirical analysis to analyse the influence of listed companies while using assets impairment to earnings management, verifies that the implementation of the new accounting standard makes the space narrow in the using assets impairment to earnings management used by listed companies, with the same mean of it can inhibited the behavior of listed companies while using assets impairment to earnings management effectively. And then this paper evaluates the effect of new assets impairment standard reasonably. Finally the study of this paper can promote the development and improvement of the accounting standard.