The Research On The Inventory Devalue Provision From The Perspective Of Earnings Management

Using the provision and reversal of asset impairment for adjusting profit has been a normal means of earnings management in china’s listed companies.Not only affect the authenticity and reliability of corporate accounting information,it also undermines the interests of the users of accounting information,and have a negative impact on economic development.Our policy of asset impairment began in 1992,it made provision for inventory impairment for the first time.On February 15,2006,the Ministry of Finance issued"Accounting Standards for Enterprises No.8-Impairment of Assets,The new standard requires that asset impairment loss can not be reversed in subsequent accounting periods,once it is recognized.Some scholars have shown that the implementation of new accounting standards significantly improve the quality of accounting information,but the new standards do not restrict the reversal of short-term assets such as inventory.therefore,companies may still carry on accounting earnings management by proving and reversing short-term assets impairment.This article includes firms that announced inventory devalue provision during the period 2003-2014.We use descriptive statistics and multivariate linear regression analysis,analyze changes of the provision and reversal of inventory devaluation in listed companies,before and after the implementation of guidelines,invest the relationship between the motivation of earnings management and the level in provision and reversal of inventory impairment,inspect the impact on the level in provision and reversal of inventory impairment and criteria change,verify whether listed companies have the motivation to use provision and reversal of inventory impairment in earnings management.Based on the background of the new asset impairment policy,implemented in 2006,this paper differs sample companies into old and new periods of accounting standards,verifies whether listed companies have anti-loss,losses,big bath,smoothing profits and management changes and other motives when they accrue and reverse inventory impairment in different periods of accounting standards with multiple linear regression analysis.In this paper,the followings are conclusions:The level in provision and reversal of inventory devaluation improved significantly in listed companies after the implementation of new guidelines,on the one hand,business inventories may experience impairment of assets,damage,listed companies generally accrue impairment losses after the implementation of new guidelines;on other hand,new guidelines have limited provision for impairment of long-term assets,listed companies turn to accrue more inventories and other short-term assets impairment;the study also finds that there are in earnings management motivations to accrue and reverse inventory impairment.Listed companies in losses will improve the level in reversal of inventory impairment this year,so as to achieve the purpose of profitability;Listed companies in big bath will reduce the level in reversal of inventory impairment this year,it states that listed companies in losses exist use inventory impairment reversal for earnings management;Listed companies in smooth will improve the level in provision of inventory impairment this year and reduce the level in reversal of inventory impairment for reversing more inventory impairment in the next year,in motivation to make companies keep profit;Listed companies in changing management improve the level in provision of inventory impairment this year,so they can reverse inventory impairment in the next year for improving the next annual accounting profit.Based on the results of the foregoing,this paper proposes policy recommendations:First,further improve the relevant accounting standards for inventory devaluation.Next,strengthen the supervision of enterprise inventory impairment.Third,improve the company’s internal control system related to inventory devaluation.