A Study On The Approach Of Making Accounts Receivable Bad Debts Reserve Policy Of Listed Companies

The subject comes from a listed company's confusion about how to make a accounts receivable bad debts reserve policy.To solve the confusion,based on deeply analyzing accounting rules and looking into references,this paper discovers something interesting.Even the statistics on 484 selected listed company reveals some problems that those companies have about making bad debts reserve policy in practice.The followings are what I notice:(1)The framework is the only thing that the accounting rules regulates,which allows the listed companies to design each specific part according to their own characteristics.(2)Those related studies always focus on some section of the bad debts reserve policy,which means a complete method to make bad debts reserve policy hasn't been form yet.What's more,those studies pay more attention to explaining the accounting rules,and fail to take traits of companies into account.(3)In Rule No.15 of Company Information disclosure of listed companies—General provisions for financial report,individualized disclosure is encouraged.Dividing accounts receivable into different groups is one part of the policy,this part relatively shows companies' features most among all parts,while in reality,most companies make similar decisions about how to divide accounts receivable.Statistics from database named Wind shows that the proportion of accounts receivable to total assets goes up year by year,which makes the importance of a suitable bad debts reserve policy greater.In the process of making the policy,accountants need to use their professional judgement.Well,put it in another way,those judgements are subjective.Because of lacking scientific approach,listed companies are often questioned on their bad debts reserve by auditors.Against such a background,after reading lots of relative literature and studying then organizing those findings,this thesis integrates those findings into a relatively complete approach.For the convenience of statement,this approach is named the existed approach.After analyzing the existed approach,three main defects need to be pointed out:(1)failing to consider the quality of accounting information.(2)ignoring the influence of the management activities of accounts receivable.(3)overlooking characteristics of companies.From the statistics to 484 selected listed companies,difficulties in making bad debts reserve policy in practice are unveiled.Based on the existed approach,this thesis takes three defects as a jumping-off point then improves the existed approach by solving those confused problems.In the last part,this paper makes a comparison between the existed approach and the improved approach,to show the improved approach could guide listed companies step by step when they making accounts receivable bad debts reserve policy.Conclusions drawn in this paper are followings:(1)After integrating scattered findings,this paper extracts the existed approach,which includes four logic steps.(2)There are three defects in the existed approach.(3)Listed companies have trouble in setting standards used to tell whether the specific accounts receivable is significant or not,and making bad debts reserve policy about loss testing of portfolio.(4)The goal of making accounts receivable bad debts reserve policy is to guarantee the quality of accounting information.Beside the basic and obvious fuction of taking off bad debts reserve,bad debts reserve policy could also assist in management activities of accounts receivable.(5)There are six logic steps of first level in the improved approach,among all the six steps,the second and third steps have respective steps of lower level and techniques.The significance of the study conducted in this paper are the followings:(1)In the theoretical dimension,this study makes up for deficiencies in the existed approach and inproves it.What have been done in this study could be regarded as integration,supplement and deepening of related literature.(2)In the practical dimension,the practicality of the improved approach is strengthening by adding techniques in each steps.This paper provides guidance of making accounts receivable bad debts reserve policy for the listed companies,which reduces the subjective randomness of accountants' judgements.