Status for asset impairment and discuss the proposals and responses

Abstract: When the socio-economic environment changes and internal variety of reasons, often caused by impairment of assets, leading to the asset's recoverable value is less than book value, measured at historical cost value of the assets no longer have decision-making relevance. Article on our current status of asset impairment exist and a detailed analysis of the problem, and put forward some suggestions and countermeasures.

Keywords: impairment of assets; recoverable amount, recommendations and countermeasures

February 15, 2006, the Ministry of Finance reference to international accounting standards, practices, individually formulated and promulgated the <<Accounting Standards for Enterprises No. 8 - Impairment of Assets>> specific guidelines for standardized accounting system so that the impairment of assets is more increasingly standardized, more maneuverability, but in practice, some companies just impairment of assets as a tool to manipulate profits, assets, quality of accounting information has not been significantly improved, China's enterprise value of the assets are not real common situation, a certain extent, affected the company's authenticity and reliability of financial reporting.

First, our current status of asset impairment exist and the problem
First, asset impairment recognition and measurement difficult. Provision for asset impairment of assets, the key is to determine the expected future economic benefits, however, must be reasonable confirmation of the asset's recoverable amount greater difficulty. A China's current asset information, the price the market is not sound, so the lack of provision for impairment of assets basis, and second, fixed assets, intangible assets accounted for, due to technical updates, market decline and other reasons, the value of depreciation will occur, its far beyond the accounting recognition and measurement of professional competence required to identify more than one sector to work together, even outside the enterprise needs a professional evaluation agencies can be identified.

Second, the net realizable value, recoverable amount of complexity. Net realizable value of inventories, fixed assets, the recoverable amount of other information is enterprise asset impairment recognition and measurement basis of which the net realizable value, recoverable amount to a certain extent dependent on the subjective judgments of accounting personnel, there is a big subjective, and the results will vary. recoverable amount in the present value of expected future cash flows expected to determine the need for a certain period of future cash inflows and the discount rate, the discount rate is a very destabilizing factor, leading to asset impairment provision for flexibility too.

Third, the disclosure of impairment of assets is too simple in the balance sheet, according to their book value, after deducting the net impairment to reflect the assets in the income statement, the provision for asset impairment is recognized when the loss has not been sufficiently clear reflection be seen that the new guidelines relating to asset impairment provisions for information disclosure, and compared to the requirements of international accounting standards are too simple, the larger the gap, such as some listed companies, although under the new guidelines requirements for impairment of assets has been disclosed, but its content is very simple, would not achieve substantial role, it is difficult to achieve full disclosure requirements.

Fourth, the impairment of assets in the practical operation of the extraction of the difficulties faced. In order to properly measure the impairment of assets, you first need to address is the choice of measurement standards, which will directly affect the rationality of asset impairment accounting and operational sex, this is not the unity of the two, if you choose should also take into account the needs of theory and practice, but the theory is reasonable does not mean that in fact the operability, because the correct estimate and calculate the present value of future cash flows is often difficult, so in practice also need to adopt other standards, such as future cash flow measurement standards, fair value, net sales value, net realizable value and recoverable amount.

Second, on the impairment of assets of the relevant recommendations and measures
There is provision for impairment of assets, the biggest problem is the impairment accounting recognition and measurement of subjective and arbitrary, resulting in the current situation for many reasons, for these reasons, this paper proposes the following countermeasures:
First, the importance of assessing impairment should be considered principles of financial accounting information is provided by the worth and importance of the principles of cost-effective common constraints, according to China's basic provisions of the guidelines, business transactions or events should distinguish between the importance of accounting treatment. of assets, liabilities, profit and loss, etc. have significant impact, thus affecting the user to make reasonable judgments of the significant accounting matters, should be in accordance with prescribed accounting methods and procedures for processing; for minor accounting issues, accounting method shall be in accordance with the provisions of and do not mislead users make the right judgments under the premise of the appropriate simplified. Therefore, before impairment testing, you should also consider the importance of the principle.

Second, uniform standards of measurement, to reduce man-made judgments and estimates due to corporate governance, accounting standards, imperfect and incomplete accounting information market, accounting policy choice has a certain diversity to give business a certain degree of accounting flexibility, ease of enterprises through professional judgments and accounting choice to give the market the company-specific information, but also set up our first one of the purposes of impairment of assets, so the trial should be the scope of impairment of assets for a more detailed requirements, minimize accounting personnel man-made the range of estimates and judgments, to avoid the company of the subjective and arbitrary implementation of accounting policies, uniform and standardized method of provision for impairment of assets and the accrual ratio, as much as possible to reduce a similar business approach to diversity and choice. Links to free download http://www.hi138.com
Third, to further improve and develop the information market and the market prices due to China's information market and the price the market is not perfect, whether it is business, service agencies, or the securities regulatory authorities are difficult to obtain a variety of investment companies, stock market, the current and reasonable prices, leading to a lack of provision for work not only measure, and the lack of constraints means, therefore, only the price of the market and improve the information system of asset valuation, business value and the fair market value of assets to reflect a fair and reasonable, so that impairment of assets The accrual rules to follow, reflect the accounting fairness and objectivity.

Fourth, establish a sound business performance evaluation system. Corporate financial statements using various means of whitewashing the inner motivation come from outside the operating results of the evaluation requirements of its end, it is necessary to establish a scientific and rational business efficiency performance appraisal system, the financial indicators and the assessment of non-financial indicators combined to change the past only to focus on results, without attention to study the process of the formation of procedures and practices. The only way to fundamentally ease the current serious problems of earnings manipulation, and help guide and promote the healthy development of enterprises.

In short, through the study of impairment of assets can be seen, the use of asset impairment accounting, the assets of China's enterprises to improve quality and reduce the potential risks of the operation of enterprises, fully embodies the principles of sound accounting. As long as we continue to strengthen the accounting information quality management, and timely training on the quality of accounting personnel, will create a sound and healthy, good market environment.

References:
1, Li Runcheng. On the new criteria for impairment of assets, the theory and practice [J]. Accounting Research, 2006 (3).

2, Wang Xueyi. On provision for asset impairment Some Reflections [J]. Accounting Communications, 2005 (8).

3, Yang the new features and content of accounting standards on accounting practices [J]. Audit and Economy, 2006 (6) Links to free download http://www.hi138.com