Under the new guidelines of earnings management

2006, China issued new accounting standards system reflects the international convergence, but also to the enterprise's financial and accounting officer unprecedented challenges, most notably the introduction of fair value, accountancy professional to determine the contents of the unprecedented expansion, leaving earnings management, a corresponding expansion of space. New accounting standards system requires not only the corporate accounting staff to develop guidelines to understand the intentions, and provide accounting information should provide more of the business decision making. This Article is the study the new system of accounting standards based on professional judgments of space is proposed within the system using new criteria to determine the accounting profession's approach to managing surplus space for business management and accounting staff to provide an appropriate platform for earnings management.


I. Overview of earnings management

(A Definition of Earnings Management
Earnings management, also known as profit management, accounting academic Research in recent years one of the hot issues, but on the concept of earnings management, accounting, there has been a lot of different views on academia. Authoritative definition of a U.S. General Accounting scientist snow (Katherine Schipper, 1989 in the famous "earnings management comments" raised in the Article: Earnings management is really designed to be a destination of foreign intervention in the financial reporting process, to obtain some private interests, "Disclosure." This definition highlights the earnings management The stArting point is to satisfy private interests. Sri Lanka can be special U.S. accounting experts (Scott, 2000 that "Earnings management is the extent permitted by GAAP, the accounting policy choice made by the operator or the enterprise market value of their utility maximizing behavior." But The definition is narrow and will limit earnings management constraints of generally accepted accounting principles in the context of the approach includes only the choice of accounting policies. In addition, the United States before the Commission the main Xilaiweite (Arthur Levitt, 1998 expressed concern about the phenomenon of earnings management, that earnings management has become a pArticipant in the U.S. stock market game between the violation of market principles, the U.S. financial reporting system will result in a very bad effect. management abuse "substantial write-off" approach to adjustment costs are threatening the reliability of financial reporting . the earnings management and financial fraud difficult to distinguish between the area known as the "gray area." This definition is a broad concept of earnings management. This paper will define the earnings management of earnings management in the narrow sense.

(B earnings management methods on
Throughout the scholars of the earnings management methods are classified into the following categories:
First, the selection and application of accounting principles. For example: (1 application of the principle of prudence. That accounting is not allowed enterprises in total assets and more income, less accrued liabilities or expenses. (2 importance of the application of the principle. Important principle that should be of minor items are not accurately measure and report their. enterprises can use to judge the importance of the accounting profession and by increasing or reducing the principle that the accounting data is not important for earnings management.

Second, the selection of accounting policies and methods. In the choice of accounting policies, corporate earnings management generally in the perspective of standing in favor of corporate management's point of view option, but once the selection of accounting policies to be altered arbitrarily.

Third, the timing and number of accounting estimates and judgments related party transactions also provide space for earnings management.

Practitioners in specific operations, often combined with management's intent and objective environment in which the company's development, from the big surplus, balance surplus, surplus, and cleaning a small surplus by choosing appropriate management.


Second, Earnings Management and Accounting Professional Judgement

Judgement on the earnings management accounting profession have an important impact, according to a variety of domestic and international representation, this article will determine the accounting profession is defined as "knowledge of accounting expertise and experience in the accounting staff, based on objective, careful, honest attitude in a highly responsible for the accounting information users and to provide quality information of professionalism, professional standards in the framework of the accounting or accounting professional standard-setting bodies under the guidance of consciousness, through the identification, calculation, analysis, comparison or advice and other methods of accounting matters of uncertainty and conclude that the decision made by the thinking process. "Although the earnings management and accounting professional judgments are matters of uncertainty accounting judgments made, but the accounting profession to determine and earnings management there still exist between the significant differences:
First, the main difference. Earnings management are the main enterprises management, and accounting professional to determine the main body of the accounting personnel engaged in accounting work.

Second, for different purposes. The purpose of earnings management is to get management's private interests but the interests of beneficiaries and the performance is very complex, usually with compensation plans, debt covenants and political costs of the three motives, but also public offering of shares at this stage , share placements, to avoid penalties, playing the stock market and other motives. The accounting profession, accountants are required to determine the objective facts must be respected, to reflect the true economic matters of the enterprise's financial position and operating results of the actual impact, making judgments, to keep objective and neutral.

Third, different object. The object of earnings management has two categories: generally accepted accounting principles, accounting methods and accounting estimates, and second, the planning and timing transactions choice. Because the accounting profession to determine the economic issues are generally carried out after Therefore, it only matters including the former category included. that earnings management part of the aggregate accruals for non-split part of the subjective and the subjective accrued accrued parts. some non-subjective accrual accounting profession does not need to use too many judgments, The accruals related to the subjective part of the accounting staff needs to carefully determine the reasonable use of the accounting profession.

Fourth, different Research purposes. Earnings management primarily using empirical Research methods, Research aims to reveal the existence of earnings management, and its interpretation of studies involving a series of management and economic issues. Accountancy profession to determine the focus of the study is to investigate accounting professional staff to determine the law, designed to help determine the level of professional accounting staff to improve and reduce the bias to judge, to better serve the legitimate earnings management services.

Ministry of Finance in February 2006 since the implementation of the new guidelines, China's accounting standards with the only truly international convergence. Implemented new guidelines to the practitioners of the accounting professional judgments more space, but also the accounting officer of the greater challenges. If a reasonable fair value pricing, investment property, biological assets, financial instruments and so need to use reasonable professional judgments accounting staff. In other words, the current mode of the new guidelines fully adopt international accounting standards "principle-oriented model "was referred to the accounting profession to determine an unprecedented level, to the accounting officers of the company's earnings management provides a greater platform. reposted elsewhere in the Research Papers Download http://www.hi138.com Third, under new guidelines earnings management space Research

Accounting is the accounting uncertainty inherent in, it makes economic and business with a company or economic matters of the use of different measurement methods, or measured by different accountants will produce inconsistent results, which provide a legitimate earnings management opportunities. In the framework of accounting standards, if the enterprise can reasonably determine the legitimate use of the accounting profession's earnings management, then the accounting regulatory bodies will be encouraged to carry out more boldly accounting personnel judgments, so that the accounting staff to determine levels of occupational the increase. Conversely, if most companies are not legitimate earnings management for the purpose of the accounting profession to determine the abuse, then the accounting regulatory bodies will inevitably cut through the revised accounting standards, the accounting profession to determine the space to block the use of corporate management earnings management accounting professional can determine the drill hole. Therefore, this combination of new guidelines on accountancy professional to determine the space on the earnings management following induction:
On accounting principles, accounting to determine the conditions and time
Accounting Standards for Enterprises - Basic Standards.

(1 Accounting Principles.

① relevance. Article 13 of the new guidelines, companies should provide accounting information and financial accounting reports related to economic decisions of users. On the relevance judgments that is requested for business enterprise decision-making needs of earnings management exists.

② substance over form. Where professional accountants are required to determine the substance over form principle in the use of specific guidelines. The new guidelines relating to the economic substance of a non-monetary assets to determine criteria for the exchange of commercial real judge, finance lease judgments, debt restructuring of the debtor to make substantive concessions to the transfer of financial assets to determine control include the consolidated financial statements of subsidiaries to determine the scope of the contract the split and merger, the division of assets or asset groups and so on.

③ importance. Article 17 of the new guidelines for accounting information of enterprises of all significant events or transactions. As for the "importance level", does not require new standards, this article that the CPA can refer to a measure of the importance of the audit to determine.

④ prudence. Article 18 of the new guidelines require companies should not overestimate the assets or income, debt, or underestimating expenses, which is the objective of earnings management requirements.

(2 assets, liabilities, equity, income, expenses, profit recognition elements.

Recognized as an asset or liability requirements accurately determine three things: "corporate transaction or event in the past" and "owned or controlled by the enterprise", "expected to bring business into or outflow of economic benefits." Recognized as income or cost required to determine the following three elements: "Business daily activities took place," "will lead to increase or decrease in equity" and "will lead to nothing to do with the distribution of profits to the owners of the inflow or outflow of economic benefits." Links http://www.hi138.com Research Papers Download