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Effect of preference change asset impairment of earnings management mode choice

Author: YangLiJuan
Tutor: LiuJing
School: Yunnan University of Finance
Course: Accounting
Keywords: Assets impairment criteria Methods of earnings management Choicepreference
CLC: F275
Type: Master's thesis
Year: 2013
Downloads: 27
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Abstract

On February15,2006, the Ministry of Finance promulgated the "Accounting Standards for Enterprises No.8-Impairment of Assets" as a separate criterion for the first time. The assets impairment criteria provided the recognition criteria, measurement methods and disclosure of assets devaluation in a detailed and systematic way which changed the immethodical actuality of the asset impairment policy. So what is the goal orientation of major changes of the assets impairment? Whether there is a significant difference in surplus management methods have taken place before and after the change? How about the specific implementation with different motives of earnings management? Whether the implementation of asset impairment standard has achieved its expected goal? System analysis and in-depth study of these problems, not only can clarify the possibility of asset impairment criteria being manipulated and implementation path, but also can provide certain reference for regulatory decision-making which has certain practical significance. In theory, it is also the extension of asset impairment and earnings management research.Based on the problems mentioned above, as means of descriptive statistics, one-way analysis of variance and multiple linear regression analysis using the STATA10.0and SPSS16.0statistical software, this paper focus on the2004-2011years manufacturing listed corporations assets impairment (divided into current assets and long-term assets) provision, reversal and write-off through the empirical analysis, than goes into the influence on the preference of earnings management based on the change in asset impairment criteria. The conclusions of the thesis as follows:(1) One-way ANOVA analysis of the structure of provision, reversal and write-off for assets impairment of the sample companies during2004-2011shows that the structure of current assets and long-term assets for impairment are revealed significant differences, and the provision and write-off of long-lived assets impairment before the implementation of the criterion has significantly increased which shows that new policy of assets impairment has a significant effect on the structure of assets impairment of the listed corporations.(2) Multiple linear regression shows that the degree between earnings management and assets impairment of samples compared with standards ago has significant changed. After the implementation of the standard, the behavior of listed companies using long-term assets impairment to manipulate earnings hasn’t gone down, but significantly increased. Moreover, the proportion of long-term asset impairment write-off will more higher if the loss companies can reverse losses, which shows that after the standard operated listed companies can also reduce losses for the win by long-term assets impairment write-off, and the change in assets impairment standard can not effectively restrain the listed corporations using the long-term assets impairment to manipulate earnings.(3) Listed companies with different motives have preference in methods of earnings management. After assets impairment criteria implemented, listed companies achieve their profitable objective by long-term assets impairment write-off. Loss companies prefer to take advantage of the large provision for impairment of long-lived assets to purge. Highly profitable companies tend to have more current asset impairment provision to smooth profits.

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