Case Analysis Of FAW Xiali Using Non-recurring Gains And Losses To Manipulate Profits

The approval system is implemented in China's stock issuance,it makes listing procedures complex and difficult.Therefore,the shell resources of listed companies are extremely precious in China's securities market.Many listed companies protected their shell resources at all costs after they got special treatment(ST),and the most commonly used means is using non-recurring gains and losses to manipulate profits.Non-recurring gains and losses refer to the gains and losses arising from transactions or events other than the normal business activities of an enterprise,they are abnormal in nature and frequency.Due to the lack of relevant provisions on non-recurring gains and losses in China's accounting standards for enterprises,the requirements on the definition and disclosure of non-recurring gains and losses by the SFC are imperfect,and after the revision of the delisting system in 2012,the important condition to remove special treatment of “net profit after deducting non-recurring gains and losses is positive” is abolished,all these make non-recurring gains and losses a powerful tool for profit manipulation of listed companies.Profit manipulation seriously affects the decisionmaking judgment of statement users,and makes some inferior ST companies exist in the stock market for a long time,which is not conducive to the development of China's capital market.Scholars have taken listed companies in Shanghai and Shenzhen stock markets as samples to conduct empirical research on the phenomenon of corporate profit manipulation in depth.However,few scholars use case analysis to study the behavior of listed companies using non-recurring gains and losses to manipulate profits.This paper summarizes the causes and consequences of FAW Xiali's profit manipulation by using non-recurring gains and losses,reveals the defects of current accounting standards and ST system in China from one side,and also illustrates the harm of this behavior to the long-term development of enterprises.This paper mainly adopts the method of combining normative research with case analysis.In the aspect of normative research,a large number of relevant literatures are reviewed and summarized.The motivation and consequences of profit manipulation,the definition and disclosure of non-recurring gains and losses,and the means by which enterprises use non-recurring gains and losses to manipulate profits are expounded.In case analysis,taking FAW Xiali's behavior of manipulating profits by non-recurring gains and losses as the research object,this paper introduces the ownership structure and operation situation of FAW Xiali,analyses its profit situation in each year.This paper introduces four methods of FAW Xiali's profit manipulation by non-recurring gains and losses in detail: transfer of non-current assets,amortization of deferred revenue from government subsidies,restitution of allowance for impairment of accounts receivable and utilization of other non-operating income and expenditure.This paper focuses on the reasons why FAW Xiali manipulates profits and chooses nonrecurring gains and losses to manipulate profits.It explains the reasons why FAW Xiali successfully uses non-recurring gains and losses to realize profit manipulation,and analyses the various consequences by this behavior.Finally,the conclusion of this case study is drawn,and suggestions are given from the perspective of system and supervision to reduce the behavior of listed companies using non-recurring gains and losses to manipulate profits.The framework of this paper is divided into five parts.The first part is the introduction.This paper mainly elaborates the background of the topic selection and its research significance,collects and collates the literature related to the topic selection,summarizes the research contents of predecessors in this area and points out its shortcomings.The second part is an overview of the theory.This paper mainly explains the concept of non-recurring gains and losses and its relevant provisions,then introduces the motivation and means for listed companies to manipulate profits by using non-recurring gains and losses,and explicates the relevant supporting theories.The third part is the case introduction.This part introduces the ownership structure and operation situation of FAW Xiali,analyses the company's profit situation in each year,and elaborates on its specific means of using non-recurring gains and losses to manipulate profits.The fourth part is case analysis.The key content of this chapter is analysis on the reasons and consequences of FAW Xiali using non-recurring gains and losses to manipulate profits.Firstly,the motivation of FAW Xiali's profit manipulation is analyzed,then the reason why it chooses non-recurring gains and losses to manipulate profits is analyzed.Finally,the reasons for its successful implementation of profit manipulation are analyzed from the aspects of statutes,government,enterprises and auditing,and the consequences of this behavior are pointed out.The fifth part is the conclusion and enlightenment of case study.Through the analysis of the preceding text,the corresponding conclusions and enlightenments are drawn in this chapter.The main contributions of this paper are as follows:(1)In the previous studies on the listed companies' use of non-recurring gains and losses to manipulate profits in China,scholars often focus on enterprises in a certain industry in Shanghai and Shenzhen stock markets,and seldom choose a typical company for in-depth analysis.This paper chooses FAW Xiali as a case company to study,enriching the research literature on enterprise profit manipulation.(2)In the previous studies on profit manipulation of Listed Companies in China,the research methods of scholars are mainly limited to empirical research.This paper uses the method of normative research and case analysis to study the reasons and consequences of listed companies using nonrecurring gains and losses to manipulate profits,which can provide experience for the improvement of current accounting standards and delisting system in China.