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Profits of listed companies to manipulate the case analysis

Author: YuChangJun From: www.yourpaper.net Posted: 2009-07-17 15:35:51 Read:
Abstract: corporate accounting statements is a comprehensive reflection of a certain period of financial position, operating results, as well as changes in the financial condition of a written document, the ultimate purpose of preparation and accounting statements, in order to achieve the rational allocation of social resources. Therefore, existing and potential investors, creditors, the government and its agencies are required to provide financial statements give a true and fair reflection of the financial position, results of operations and cash flows.
Keywords: listed companies; methods and motives of profit manipulation; accounting analysis

Is a comprehensive corporate accounting statements reflect a certain period of financial position, operating results, as well as changes in the financial condition of a written document, the ultimate purpose of preparation and accounting statements, in order to achieve the rational allocation of social resources. Therefore, existing and potential investors, creditors, the government and its agencies are required to provide financial statements give a true and fair reflection of the financial position, results of operations and cash flows. But in real life, enterprise management in order to achieve the purpose of obtaining illicit benefits deliberate whitewash accounting statements, through a variety of methods to manipulate profits. This article attempts to be a simple accounting analysis of common method of operating profits, which have a more sober accounting information provided by the enterprise, a correct understanding.

A profit manipulation method

(1) the use of related party transactions to manipulate profits. Related party transactions is the transfer of resources and obligations of the matter in the related parties, regardless of whether a price is charged. Related parties mainly refers to the company's financial and operating decisions, the ability to direct or indirect control, jointly control the other party or parties concerned to exercise significant influence over the other party. Theoretically, the related party transactions is a neutral trading. In fact, some companies in the related party transactions using the pricing of the agreement, the transfer of profits between related parties.
associated with the business of buying and selling to manipulate profits. Example: ST Su Shan, 1997 sale of a consignment to a subsidiary of the controlling shareholder of the company, the sales income of 160.02 million yuan and 140.02 million yuan, the cost of sales, generated a net profit of 20 million yuan, the transaction price is determined by the agreement. The trading profits accounted for 23.5% of the company's total profit in 1997. affiliated companies charge fees of funds used. In accordance with the relevant regulations, does not allow the funding of lending to each other, but in fact very common phenomenon associated enterprises lending money. A long-term debt investments associated enterprises, receive a fixed return rate of 20%, a big chunk of profits for the companies to create. managed operating adjustment of profits between associated enterprises. At present, China's securities market is also a lack of the hosting business regulations and practices, the hosted operating profits of listed companies to manipulate the other way. The number of listed companies in the non-performing assets entrusted to the related business, fixed a return listed companies avoided the loss of non-performing assets, and a profit out of thin air. Conversely, the associated enterprises through strong compared with profit of assets in order to lower the income is hosted by the listed company directly injected into the profits of listed companies.
(2) losses are processing profit manipulation.
Provisions of the new accounting system, the processing costs of the enterprise, should be dealt with immediately in the current period and are included in the profit and loss. However, some enterprises in order to achieve the purpose of profit manipulation, especially in order to make current earnings, deliberate non-compliance with the rules by lower incurred losses are way inflated profits.
receivables, especially for more than three years of long-term receivables unpaid debts. Receivables enterprises sell their products, provide services and other reasons, the amount shall be charged by the buyer or receiving labor units, because it is the main business of the enterprise sales business enterprise, and therefore, in general, receivables recoverability of great influence on corporate performance. Receivables for more than three years, a very small possibility of recovery of bad debts through profit or loss shall be transferred in accordance with the regulations. Prescribed for more than three years of accounts receivable to a bad debt, It has been calculated that in 1997, listed companies in Shenzhen and Shanghai City loss number by 42 to 114, the loss widened to 14% from 5.2%. This shows that the receivable great impact on revenue. In reality, there is such a case, that the needs of companies in order to inflated sales and falsifying accounts receivable.
(2) in the construction of long-term unpaid debts. This is mainly reflected in the majority of enterprises, will the external part of the integration into the funds to build its own fixed assets. Borrower need to schedule accrued interest, according to the accounting system, this part of the interest on borrowings prior to construction in progress are not in the process was completed formalities should be capitalized. If enterprises under construction are completed and not completed in the accounts, the interest can be included in construction in progress costs so incurred to reduce (reduction in finance costs), on the other hand, can be less depreciations from two aspect to inflated profits. Above Dahlman had used this method to manage earnings, the fixed asset investment continued, often have huge amounts of construction in progress, and these projects are often not timely benefits. Dahlman first offering to raise 1.47 billion for investment in fixed assets, and thereafter twice a placement of shares to raise a total of nearly 600 million yuan, is also a major investment in fixed assets; jewelry processing production line expansion in major engineering construction projects, Xi'an International Jewelry Trade Center, the the Dujiangyan gem processing center, ecological agriculture and horticulture project is expected to generate effective period from 1 year to 3 years. Dahlman board of directors almost every year proposed a new fixed asset investment projects and hundreds of tens of millions of dollars invested, leading to the "construction in progress" in the company's total assets amounts chronically high. In 1999, Dahlman "construction in progress" value as high as 30,474.05 million, higher net fixed assets than in the past half; 2000, although many projects have been announced for completion, but the value of construction in progress "is still as high as 29,706.01 million and the Board of Directors second placement is also preparing new investment in fixed assets. Construction in progress of these long-term unpaid debts of the company's profits manipulation turns out is of great significance.
(3) non-recurring income profit manipulation.
Other operating profit.
Other business enterprise in the course of business a sporadic income business, and other businesses do not belong to the main operations of the enterprise, but for some companies, it's the company's overall profit contribution indeed "hammer fixed-jin" role. Such as the guitar light industry, the main industry in 1997 loss of 42.92 million yuan, can be "glad" mergers the Changchun Light Industry Machinery Factory during 1997, the plant in November 1997, a transfer of land use rights, net profit 51.98 million yuan, the guitar light industry has thus year turnaround ROE reached 10.3% 3.2 investment income.
(2) to adjust the prior period.
In the income statement, "prior period adjustments" to reflect this subject enterprises to adjust prior period matters affect the amount of profit for the year. Therefore, some companies also "home of the resurrection of Health." Yaohua Glass landslide serious performance in the year 1997, the total profit of only 143 million. But in the income statement, but a prior period adjustments of up to 34.34 million yuan. In this regard, the company also gave an adequate explanation: partly responsible for subjects in accordance with the relevant documents on the local financial cleanup. "The glass furnace nineteen machine kiln shutdown cleanup, update and overhaul the problem does not exist", have been approved to write off 11.8 million yuan the previous year accrued furnace reset deducting the balance of the clean-up costs "; two according to the requirements of the relevant documents, "the company owed financial commissioned loan interest place to write off, so in previous years has been included in the financial costs should be adjusted to write off interest-total 15.74 million yuan;" because of the 1997 Company of the Year poor operating efficiency, according to the way of the implementation of a unified performance-linked, the liquidation amount of the wage rate to fall by year-end financial departments accordingly adjust the float downward wage adjustment before the annual cumulative benefits accrued wages of 6.8 million yuan. "2 profit manipulation countermeasures Proposed

the strengthening of the internal control environment. In summary, we believe that, starting from the control environment, organizational structure, establish modern enterprise system to strengthen the functions of the board of directors and its independence.
Incentive Optimization. The fundamental characteristics of the modern enterprise system is that the separation of ownership and management structure of property rights, and based on the principal-agent relationship. Information asymmetry between the principal and agent, both goals may be inconsistent, to maximize the client want to achieve their own goals, is bound to take a variety of incentive and monitoring the behavior of agents. To solve the one hand, managers the autonomous operating decisions, manage the company's day-to-day production and business activities within the scope of authorization of the Board; the other hand, to form an effective incentive for company managers and oversight mechanisms, so that they can in the interests of the shareholders ground rules, in order to protect the owners' interests, and to reduce the losses suffered by investors due to the self-interested behavior of managers.
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