Yong Tai Energy Earnings Management Case Study

Companies under pressure from financing needs and performance status,or listed companies in order to stabilize stock market prices and avoid company losses,may carry out earnings management.Because the uncertain characteristics of accounting estimates,the management of listed companies has a certain degree of subjectivity when making judgments and choices,and there are fewer channels for external investors to access corporate accounting estimates,which makes external personnel cannot evaluate and supervise the rationality of changes in accounting estimates of listed companies well.At present,many listed companies,especially those in the asset-heavy industries,use changes in fixed asset depreciation accounting estimates to adjust financial statement data to achieve the purpose of adjusting earnings.The modified financial statement data concealed the true financial operating conditions of the enterprise,making it impossible for investment to make accurate investment decisions,and preventing effective allocation of resources in the capital market.The existing research results mostly focus on the motives and means of using accounting estimate changes for earnings management,but there are few specific case studies on using fixed asset depreciation accounting estimates.Therefore,this dissertation selects Yongtai Energy’s earnings management as a case to analyze in detail the motivation,rationality,and economic consequences of its use of fixed asset depreciation accounting estimates for earnings management.The specific case analysis mainly draws the following conclusions:(1)The main purpose of Yongtai Energy’s change in accounting estimates for fixed asset depreciation is to adjust corporate profits to survive the debt crisis.(2)The main purpose of Yongtai Energy’s change in accounting estimates for fixed asset depreciation is to adjust corporate profits and avoid losses.(3)The accounting estimate change of Yongtai Energy has improved the company’s profitability in financial data,but it does not fairly and objectively reflect the company’s true financial operation status.The dissertation uses a combination of theoretical analysis and case analysis,in the theoretical analysis part,the concepts and motivations of earnings management,changes in accounting estimates and changes in fixed assets accounting estimates are introduced;in the case analysis part,the development of Yongtai Energy’s industry and the company’s operating performance are first analyzed,and then the company’s fixed assets and its depreciation.Then,it analyzes the motivation of Yongtai Energy’s earnings management,analyzes the rationality of the company’s fixed asset depreciation accounting estimate changes from the company,investors,and the supervisory level,as well as the economic consequences of the change in fixed asset depreciation accounting estimates.Finally,based on the results of the case analysis,make suggestions,hoping to help investors better distinguish the financial impact of changes in accounting estimates and the regulatory authorities to strengthen supervision.