Case Analysis Of Byd’s Use Of R&D Expenditures For Earnings Management

With the increasing progress of economic globalization,governments around the world believe that science and technology are the key elements to promote the development of the world economy.Technological innovation can improve each country’s economic status in international competition and is also an important guarantee for the sustainable development of the country.Due to the outbreak of the new crown epidemic in 2019,the global economy has faced a severe situation.Although the epidemic has eased in the past two years,the continuous and repeated epidemic has become the most uncertain factor in the development of the global economy.This allows enterprises to reduce R&D investment to a certain extent,and at the same time increase or reduce the capitalization rate of R&D expenditures to adjust the company’s earnings management,so as to achieve the purpose of concealing the company’s real financial statement data.Under the background of the global macroeconomic downturn,how to make enterprises not reduce R&D investment,take into account the enterprise’s innovation ability,and at the same time disclose enterprise information according to the company’s actual R&D data,this is an important issue worth thinking about.After sorting out literature,it is found that the current discussion on R&D expenditure earnings management is mainly based on empirical research,but few case studies are carried out,and most of the cases are pharmaceutical companies,and there is little research on other industries.Therefore,this thesis takes the new energy vehicle industry as the research object.With the implementation of the national low-carbon policy,the scale of the new energy industry is growing,especially in the automotive industry.BYD is one of the first companies to develop and sell new energy vehicles.In terms of technology research and development,BYD has a strong research and development team and strong development strength,and has developed many world-leading technologies,such as traditional technology and electric technology.Combined hybrid dual-mode technology,and bidirectional inverter technology that can be connected to external socket.In terms of product sales,BYD’s sales have always been far ahead in the country’s new energy vehicle industry.In 2021,BYD’s new energy vehicle sales will rank second among the national new energy vehicle companies.Based on this,this thesis takes BYD as the research object.The main methods used in this thesis are the literature research method,the case study method and quantitative analysis method.The literature research method is mainly to find out the writing angle of this article by referring to the relevant domestic and foreign literature on R&D expenditure earnings management and summarizing the experience of the predecessors.For the case study method and quantitative analysis method,BYD is used as a case to quantify its financial data.Specifically,by analyzing its R&D data from 2010 to 2020,it analyzes the company’s earnings management from three perspectives,namely objective factors,motivation,and influence.The full text includes five major parts.The first part is introduction,this part first analyzes the background and meaning of the topic.Then,it summarizes the relevant literature of domestic and foreign scholars on "R&D expenditure","earnings management" and "the relationship between R&D expenditure and earnings management".Finally,the research ideas,research methods and basic framework of this thesis are expounded.The second part is related concepts and theoretical basis.This part introduces the related concepts of "R&D activities" and "earnings management",and divides the scope of R&D expenditures.Then,it introduces the four motivations of earnings management,and analyzes the objective factors,means and effects of earnings management by using R&D expenditures,so as to provide a theoretical basis for the research content of this thesis.The third part is the case introduction.This part introduces BYD’s R&D status of "large R&D investment and frequent R&D activities",but "the overall R&D expenditure capitalization rate shows a downward trend".Through analysis,it is found that the main method is to use the capitalization rate for earnings management,and sometimes there is also a way to adjust the mortization of intangible assets.The fourth part is a case study.Firstly,it analyzed the objective environment of BYD’s implementation of earnings management,and learned that BYD’s R&D activities are intensive and high-investment.At the same time,the current accounting standards have defects in this part,so that the company manipulates profits through R&D expenditures.Secondly,by analyzing the proportion of BYD’s R&D expenditure in net profit from 2010 to 2020,BYD’s long-term and short-term borrowings from 2010 to 2020,and the company’s employee stock ownership plan,it can be found that the main motivation for BYD to implement earnings management is to turn losses into profits,specifically reflected in the three years of 2012,2018 and 2019.Then analyze the impact of BYD’s adjustment of the capitalization rate on the enterprise,and find that it is mainly reflected in two aspects.On the one hand,it can transmit favorable information to the market to increase the stock price of the enterprise and increase the financing amount of the enterprise.On the other hand,it is not conducive to the long-term development of the enterprise.The fifth part is the conclusion and enlightenment.The main content is to summarize the case analysis part.After that,it is hoped that relevant departments can further improve the accounting standards for enterprises and increase the content of information disclosure of R&D expenditures.It is also hoped that when auditing the financial information of enterprises,CPAs can strengthen the scrutiny of R&D expenditures.