The Research On Asset Impairment Of Listed Company Under Special Treatment

Domestic asset impairment theory has experienced a relative long time development. Although it's still in preliminary stage comparing to those in other developed markets, it has a bright perspective with continuing revision and improvement of accounting standards, especially<Accounting Standards for Business Enterprises No.8——Impairment of assets> proclaimed by Ministry of Finance,2006. It is the first time asset impairment treated as a standard. It also introduces the concept of asset group, indicating the tendency gearing to international accounting practices. Listed companies under special treatment are special products of stock market in our country. They bear considerable rigorous supervisions. What's more, with the motivation of listing qualification protection, manager performance assessment and capital raising, they have strong intention to recover from poor performance. Thus, our question is, under current accounting standards, can ST companies make use of asset impairment to turn losses into gains? Moreover, as the first year asset impairment standards come to implementation, accompanied by post- global financial crisis economic environment, will ST companies'asset impairment actions show any patterns?First of all, this article concludes the asset impairment theory and reviews its theoretical basis, including accounting objective theory, principle of prudence and why asset impairment complies to the definition of asset. Then we link this theory with existing accounting principles through analyzing asset impairment's recognition, implementation, revising and disclosure. In the end, based on ST companies' special characteristics, we analyze difficulties they are facing and how they can make use of asset impairment to manipulate profits.Based on those theories, we conduct statistical analysis on all the ST companies between 2005 and 2009. According to their asset impairment's implementation, revising and their financial conditions, we divide those companies into several categories. The results show that:(1)Timing of asset impairment implementation shows patterns, specifically,2007 is conservative year,2008 is crisis year,2009 is recovery year; Companies from different industries show different patterns, that is, more quickly technology and asset updating, more asset impairment will implement and more impact it has on asset. (2)Asset impairment implementation can reflect economic reality and will be influenced by macroeconomic conditions. (3)When comes to revising, volume in 2006 was high and gradually went down between 2007 and 2009, finally remaining stable. (4)These companies make use of asset impairment to manipulate profit, achieving the goals of turning losses into gains. Between 2007 and 2009, nearly half of all ST companies had long term asset write off and the volume was high than that before 2007.Based on our research on ST companies'asset impairment, we point out this profit manipulation mechanism and give our suggestions, that is, continuously revising and perfecting asset impairment standards, setting special policies on ST companies, special supervisions and rigorous information disclosure. With all the works above, hopefully we can improve current standards and make them implemented in all ST companies.