Analysis of asset impairment accounting Frequently Asked Questions（分析资产减值会计常见问题）

1、 Analysis of asset impairment accounting Frequently Asked Questions Abstract: The current enterprise asset impairment accounting problems, especially in some impairment of assets for enterprise companies earnings management, profit manipulation by some of the major problems in project analysis, to i

2、mprove the asset impairment accounting, made recommendations. Keywords: asset impairment, earnings management, the main responsibility In the process of production and operations, asset impairment is inevitable, reasonably be expected to balance the possible loss that may occur in the provision for

3、asset impairment loss of assets, not only based on sound business, but also quality of accounting information requirements of the important aspects in asset impairment accounting are still some problems, especially in some enterprise companies use asset impairment for “earnings management” to manipu

4、late profits can not be ignored. First, asset impairment accounting problems (A) excluding or less account for bad debts Accounting rules, companies should be in the final analysis of the recoverability of accounts receivable and bad debt losses expected to be generated. Expected to occur on the bad

5、 debt losses, provision for bad debts provision for bad debts of the enterprise approach by the enterprises themselves determined due to accounting standards to allow enterprises to provision for bad debts ratio of the actual situation according to their own determination, for those assets better, a

6、ccounting standards for companies can indeed play a positive role, to make financial reporting more truly reflect the financial condition and operating results, on the contrary, can only become part of the companys financial position adjustable weight. In some companies, excluding companies or less

7、account for impairment of assets, and contrary to the accounting principle of prudence, which would have disclosed the information or material false, could result in materially misleading to investors while excluding, or less total Taki impairment of assets will seriously affect the measurement of a

8、ssets, to confirm the accuracy of the distortion of accounting information, undermining the seriousness of the accounting system implementation. (Two pairs of provision for decline in value of assets, freedom of choice Inventory guidelines require that inventories should be a single inventory item c

9、ost and net realizable value, if some inventory and have similar purposes in the same area with the production and sale of products related to, and actually difficult to be with the family Other distinguished the valuation of inventory, can be combined measure of cost and net realizable value; for l

10、arge quantity and low inventories, inventory category can be measured by cost and net realizable value due to guidelines allow companies to decline in value of inventory provision for single or classification, as well as provision for the situation to determine the occurrence of stock by the company

11、 the flexibility to decide, but the gap can not help but to some companies can drill. Accounting rules, companies in the use of short-term investments at lower of cost or market, according to their specific circumstances, were used according to the overall investment, asset classes or individual inv

12、estment in provision for diminution in value, if a more significant short-term investments (such as the total short-term investment of 10% or more, shall be calculated on the basis of individual investments and to determine the provision for decline in value due to guidelines require companies accor

13、ding to specific circumstances, were used according to the overall investment, asset classes or individual investment in provision for diminution in value, to some enterprise flexibility of space, so that part of the business through the accrual method of choice to reach about profits. (C) the impai

14、rment of long-term investment, “professional judgments” of bias Investment criteria requirements, companies should periodically the carrying value of long-term investment in one by one at least at the end of each year if the market price continued to fall as investment changes in operating condition

15、s or other reasons leading to its recoverable amount is less than the carrying value of the should be recoverable amount is less than the difference between the book value of long-term investment, investment loss recognized as current period. Some companies have held long-term investment market, the

16、re is no market price, whether the possession of the provision for impairment of long-term investment, according to the following signs of judgments. To have long-term investment market can determine whether the evidence should be based on the following provision for impairment: last years price low

17、er than the book value of the investment to suspend trading for one year or more, be a serious loss of investment units in the year was invested two units sustained a loss, investment units to be sorted out in liquidation or have other signs of not going. No market for long-term investments can be b

18、ased on the following evidence to determine whether the provision for impairment: impact of the investee business or legal environment, political changes, such as taxation, trade and other laws and regulations enacted or revised, may result in huge investment unit loss of the investee supplied goods

19、 or services provided by products obsolete or consumer preferences change it to the market demand changes, resulting in the investees financial condition deteriorated, the investees industry production technology occur significant changes in the investee has lost its competitiveness, leading to a se

20、rious deterioration in financial condition, such as sorted out, liquidation, there is evidence that the investment was virtually can not give an economic benefit in other circumstances. Here the word “judge” the main requirements of the corporate accounting is based on the companys own personnel and

21、 to make a subjective professional judgments. Objectively speaking, the actual situation of each enterprise and each of the different values of the different accounting officer may to determine the result of biased, this is inevitable, but some companies are using this loophole to achieve their own

22、purposes, impairment of assets between the mention and not to mention random judgments. Second, improve the asset impairment accounting Thoughts (An accounting staff to improve their professional ethics, strict self-management Accounting personnel must not only proficient in business, the task, more

23、 importantly, ensure accounting information is true, reliable, business needs to reflect the economic judgments and expression, should be based on an objective position, based on objective facts, facts, strictly so “some things.” realistic accounting practice, professional quality, overriding intere

24、sts, and many other reasons outside the accounting staff to provide a serious distortion of accounting information, can be seen, to strengthen the accounting professional ethics and self-management is urgent. (B strengthen the bodys legal responsibilities related to At present, some enterprises use

25、to regulate the accounting data accounting behavior, not only the loss of the integrity of the enterprise, but also makes the reputation of being challenged accounting. It is precisely because the current accounting system is imperfect, so that this behavior is only a “legitimate unreasonable” . Aga

26、in, another meaning of legal rules and regulations, and to be implemented not only in its frequency, but its deterrent for false accounting information to participate in the relevant law of the main, not only to clarify their legal responsibilities, but also to improve the legal responsibility of th

27、e deterrence level. Chinas current corporate accounting data, the increasing distortion of the deterrent effect of its low liability has a great relationship just so that rule, law, strictly enforced in order to truly regulate the behavior of corporate accounting, against the use of means of account

28、ing fraud act to ensure normal operation of enterprises, safeguarding the public interest. Links to free download (c) improving the regulatory mechanism of listed companies Any economic policies have economic consequences, especially in China, the economic consequences of this has

29、 been amplified, the same regulatory policies in China by listed companies and the allotment of shares in respect of qualifications for profitability and return on equity for strict rules , and provides for two consecutive years of losses if the listed company will be ST, losses would be delisted fo

30、r three consecutive years, this will inevitably lead to serious economic consequences for operators to take a variety of ways to manipulate profits. Commission supervision of listed companies some extent, to listed companies regulatory-induced earnings management, “while existing laws and regulation

31、s in a single control parameter, and more to accounting indicators (in particular, profit targets for the standards, because too much emphasis on profit targets, which prompted some companies for their own interests to manipulate profits, therefore, necessary to further improve the relevant laws and

32、 regulations, establish a comprehensive set of indicators, assessment of listed companies to improve evaluation, such as the operating profit as a profitability assessment and operating results of the key indicators, status indicators to establish the companys assets, the continued viability indicat

33、ors, cash flow from operations targets, so as to reduce the corporate accounting choices, the external system to manipulate the profit motive, so that not only can prevent the impairment of assets of listed companies provision for preparation to manipulate profits, but also to prevent the use of ass

34、et restructuring of listed companies, income tax relief and ultra vires the local government to give financial subsidies, etc. to manipulate profits. (D to strengthen supervision and management of asset impairment accounting <<Accounting Standards for Enterprises No. 8 - Impairment of Assets&g

35、t;> provides the following evidence of the existence of that asset may be impaired: (a market value of assets fell sharply, the decline was significantly higher than normal due to the passage of time or use expected to decline (2 business which the economic, technical or legal environment in whic

36、h the assets when the futures market will be in significant changes in the near future, thus adversely affecting the business (3 market interest rates or other market investment rate of return in the current period has increased, which affect the calculation of expected future cash flows discounted

37、at the discount rate, resulting in a significant reduction in the recoverable amount (4 there is evidence that assets have become obsolete or have been damaged (5 assets have been or will be idle, terminated with or ahead of schedule to use. No matter what happens impairment of assets, must have eno

38、ugh conclusive evidence to the accounting recognition and measurement, if there are indications that an asset may be impaired enterprise should be estimated for individual assets the recoverable amount, confirm the loss of assets. Asset impairment accounting treatment should be the tax department, a

39、sset management, supervision and management departments to strengthen the constraints of accounting practices and reduce its arbitrariness. (Five international experience, improve asset impairment accounting Relevant for Chinas current lack of asset impairment accounting standards, international acc

40、ounting standards should learn about criteria for impairment of assets, the content and improve Chinas asset impairment accounting, and discuss its content, publicity and reach consensus to facilitate uniform implementation of really solve overvalued assets, profits and other manipulation of account

41、ing information distortion problem, according to <<accounting system>>, short-term investments and enterprises to provision for impairment of receivables in the system still needs improvement. 1 short-term investments: enterprise in the use of short-term investments at lower of cost or m

42、arket, according to their specific circumstances, were used according to the overall investment, by investment category or by individual investment in provision for diminution in value because of the investment total, according to the types of investment dollars put out part of the decline in value

43、will offset the decline in value, according to individual investment in provision for short-term investments of the most stable bond, profit the most conservative, but whether the choice of which one, the system has not been clear. 2. Receivables: provision for bad debts of the enterprise approach b

44、y the enterprises themselves. Generally the percentage of accounts receivable balance method, aging analysis and the percentage of sales method available, and the proportion of enterprises extracting custom, which has strong mobility. In addition, the <<Enterprise Accounting System>> states that the “accounts receivable with related parties can not be full provision for bad debts”, but also provides notes to financial statements should be discl