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On the asset impairment accounting in China's listed companies application

Author: WeiQiang From: www.yourpaper.net Posted: 2009-12-03 09:41:29 Read:
[Abstract] in China accounting applications, the use of asset impairment accounting adjustments accounting profit negative phenomenon, especially in China's listed companies. The analysis should pay attention to the problem of the status quo of China's listed companies in asset impairment accounting and the process of implementation of the new guidelines, the specifications listed company asset impairment accounting Suggestions.
[Keywords] asset impairment accounting listed companies apply

First, the status quo of China's listed companies in asset impairment accounting

Sounding "cautious" excuse
51 "enterprise accounting system" clearly pointed out, "according to the requirements of the principle of prudence" as an impairment. However, only the principle of prudence norms and guidance for asset impairment accounting practices is not enough is not sufficient. Because it is difficult to grasp the scale of reasonable care, the practice also has a large arbitrariness, and the accounting treatment of current excessive caution often means that the future of the radical the excessive provision misleading information users with provision for lack of the same.
Confusion impairment was recognized standard
Asset impairment recognition criteria are mainly of three types: permanent standard, the possibility of standard and economy standards. The so-called permanent standard refers to in the book value of the assets exceeds the fair value of the assets, and the ability to judge the situation permanent when, fishes the impairment loss is recognized. But in practice it is difficult to determine what is permanent impairment, which are temporary impairment, therefore permanent standard will greatly increase the possibility of enterprise management authorities to manipulate accounting information.
The so-called standard refers to the possibility of possible asset impairment is recognized. But its features are: the basis of the recognition and measurement. When it is recognized as a judgment based on the undiscounted value of future cash flows, measured at fair value.
The so-called economy standards impairment loss is recognized in the carrying value of the assets exceeds the fair value of the assets. Its recognition and measurement using the same standards, but its fatal flaw: the market price of an asset depends on many factors, economy standards to reflect the impairment of assets, market volatility is inevitable financial statements impact.
3. Provisioning policies selectable elasticity
For receivables, companies can provision for bad debts in accordance with the balance percentage, aging analysis, credit percentage determined by the enterprises themselves, the specific use of that method; prepare for the decline in value of inventories, the enterprise can be a single project, category, etc. lives. This has led some companies to select the most favorable policies to achieve its economic motivation to provision for impairment, rather than the most suited to their state assets impairment policy, which have a negative effect. Different companies use different approach for impairment, also significantly weaken the comparability of accounting information.

Listed companies to perform should be noted that in the new guidelines

1. Recoverable amount of measurement to determine the difficulty
The new accounting standards require that the recoverable amount should be based on the fair value of the assets less the costs of disposal of net assets between the higher of the present value of the future cash flow is expected to determine. Impairment of long-lived assets are measured at the lower of their book value and the recoverable amount, the recoverable amount is less than the carrying value, should be provision for impairment of recoverable amount only to a defined, did not determine how specific guidance, poor operability.
Information disclosure. Impairment of assets not perfect
System does not explicitly detailed requirements information the disclosure of the impairment of assets, the provisions of the relevant guidelines are not very comprehensive and specific. Fixed assets such as inventory guidelines only require disclosure of inventory of current provision and the current reversal of inventory depreciation reserve for inventory obsolescence of provision and determine the net realizable value basis; criteria only requires disclosure of fixed assets recognized in the current period reversal impairment losses; investment criteria and intangible criteria also require disclosure of only the current year's investment losses and impairment of intangible assets.
3 asset group finds difficult
The new accounting standard requires the identification of the asset group, should be a major cash inflows generated by the asset group is independent of the cash inflows of other assets or asset groups. Meanwhile, recognizing an asset group, consideration should be given to the management of production and business activities of the management of the listed company and the continued use or disposal of assets, decision-making methods. Asset group is determined by each accounting period should be consistent, and shall not be arbitrarily changed, If you need to change the management of listed companies should prove that the change is reasonable, and is described in the notes to the financial statements.
If there are indications that the headquarters asset impairment, the listed company shall calculate the recoverable amount of the headquarters assets vested asset group or combination of asset groups, and then were compared with the corresponding carrying value to determine whether the asset group or combination of asset groups impairment loss has occurred. This accounting staff, how to identify the asset group there is a greater degree of difficulty for the complex problem of impaired assets, powerless, thus limiting the depth of asset impairment accounting applications. Third, the specifications listed companies in China a few suggestions of asset impairment accounting

Separately reflect asset impairment losses of listed companies love in the provision for impairment of assets is an important reason is directly related to the provision for the impairment and the profit or loss, according to the systems and regulations, the enterprise should distinguish between different asset projects, assets impairment provisions were included in the management fees, investment income, and operating expenditures account, this is not only a direct impact on the calculation of the profit for the period, and do not need to be separately reported in the income statement. Strict sense, asset impairment loss was not the actual loss provision for the matter belongs accounting estimates and accounting treatment according to the current system requires, on the one hand, will result in administrative expenses, operating expenses, investment income pre-and post-project data uncertainty may be ups and downs, the lack of comparability analysis to increase the degree of difficulty to the changes in the cost factors, affected stakeholders understanding and analysis of the profit on the other hand, because the provision or reversal of the impairment of assets represents the profit or loss is not yet implemented, so that the income statement item appears another sense distortion. Therefore, be considered to reflect asset impairment loss in the profit and loss account should be separate settings, set account details and projects based on assets, asset impairment losses included in the income statement as a separate item in the calculation of profit, in order to increase the information content of the report .
2. Differences in the information disclosure system
Disclosure of the impairment of assets in our accounting system is very simple, including the requirements presented separately for impairment of fixed assets in the balance sheet, but the remaining seven and assets are assets book balance after deducted for impairment net basis, also requires the preparation of "asset impairment of schedule" reveals eight impairment of assets, "the beginning of the period," the period to increase the number of "" in the current period to reduce the number of "the end of the period. The defects of the system is that there is no difference reflects the effective use of the information disclosure system constraints and constraints asset impairment of the recognition, measurement, such a result in the impairment of assets identified and provided in a more casual state, corporate and does not require the disclosure responsibility for the provision for the impairment scruples. I believe that the appropriate increase disclosure is necessary to eight for impairment of assets in the balance sheet and its Schedule of the amount of the corresponding asset items need to be listed separately, should be required to be disclosed separately in the income statement, assets less value loss, reason, based on standards specify provision Statements. To the importance of asset impairment proportion of size to develop specific standards, the implementation of the different information disclosure system, estimated for the major asset impairment is detailed and objective information disclosure requirements, including a detailed description of a recognized asset impairment reality environment or specific events, impairment measured specific criteria and basis for, and in subsequent years continued disclosure of that asset impairment the efforts and realistic environment changes, events, and so forth, so that enterprises to improve their awareness and sense of responsibility of the impairment of assets.
Develop penalties
In order to ensure that the policy can be effectively implemented, I believe that the appropriate penalty for in established asset impairment criteria at the same time, should also be developed, if the companies do not perform in accordance with the regulations, the regulatory authorities according to the severity of the violation, respectively against corporate fine warning and revocation of business licenses and other punitive measures to encourage enterprises to the correct implementation of asset impairment accounting policy.
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