What Is an Impairment Analysis?

Impairment allowance refers to the fact that the asset's book balance exceeds its recoverable amount. To determine whether the asset is impaired, it should be based on certain signs that the asset may have been impaired. If there are any signs, the company should formally estimate its recoverable amount.

Provision for impairment

Eight provision for impairment of assets

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"Enterprise Accounting System"

1.Unified principle of measurement mode

In fact, the different measurement modes can be unified, so there will not be many standards and it will be difficult to master. The author believes that international

China's "Enterprise Accounting System" and "Enterprise Accounting Standards" stipulate that enterprises should conduct a comprehensive inspection of various assets on a regular basis or at least at the end of each year, reasonably predict the possible losses of various assets, and

China's current provisions on asset impairment provisions not only illustrate the importance of the principle of caution, but also to avoid the false increase in assets

Implemented since 1999

Impact of accrual of asset impairment provisions on corporate accounting data

Accrual of provision for asset impairment

We know that the accounting behavior of enterprises is subject to the requirements of accounting standards and other systems, but accounting standards have a certain degree of flexibility while providing uniformity and normative guidance, leaving accounting personnel a certain space for activity and judgment in different situations. There is leeway, if there are multiple alternative accounting methods for the same accounting matter, or different judgments can be made by the accounting staff. The flexibility of the standard is to allow more companies to start from reality and coexist multiple accounting treatment methods to provide an opportunity for enterprises to carry out accounting manipulation. Some enterprises choose accounting methods and manipulate accounting statements according to their own needs. The specific accounting manipulation behaviors are various, and the following examples illustrate the following:

1.Using asset impairment reserves to increase corporate profits

TCL Communication (000542) issued a report on rectification of issues reflected in the company's 2000 financial statements on March 29, 2003.

Provision for impairment

"Announcement" announcement, the announcement showed that TCL Communications in 2000 increased profits by 49.52 million yuan. These include under-reporting of bad debts of 43.92 million yuan, inventories of depreciation of inventory by 28.13 million yuan, and under-reduction of long-term investment impairment reserves of 6.85 million yuan. TCL only interpreted the incident as a result of improper accounting treatment, improper accounting estimates, and untimely and untrue transmission of accounting information, while the relevant professionals had different views. In 1999, TCL Communications lost 178.84 million yuan. If it continues to lose money in 2000, it will be ST.

However, "improper accounting treatment and improper accounting estimates" are suspected of deliberate fraud. Not counting or understating asset impairment provisions not only runs counter to the principle of accounting prudence, but also reflects the fact that listed companies still struggle to get rid of the year-end whitewashed statements. And the major misleading caused to investors at that time also constituted a false statement.

2.Using asset impairment provisions to reduce corporate profits

Of course, when the annual report is published, there will be a variety of loss-making companies, and the reasons for the loss are various. One of the reasons is the loss caused by the "shrinkage" of corporate assets. This phenomenon occurs to a large extent because companies abuse the principle of prudence and set up secret preparations.

ST Luyin (600784) showed in the 2002 annual report that earnings per share were -1.07, with losses of up to 265 million yuan. In fact, the main business income and main business profit realized by Luyin Investment in 2002 increased by 24% and 40% respectively compared with 2002, but due to the huge amount of assets at the end of the period due to accounts receivable, entrusted loans, and foreign investment, etc. The increase of up to 100 million yuan has led to a sharp increase in management expenses. This is the main reason for the company's huge losses, and the company also put on the ST hat for this. Due to the retrospective adjustment required by the accounting system, the company also reduced its profit of 3.78 million yuan in 2001 to a loss of 24.9 million yuan. The loss in successive years has made it one of the special treatment companies for the first time to implement "delisting risk warning"- * ST Lu Yin. Although the huge accrual increased the expenses for the current year, it reduced the expenses for the following year. The report of Luyin Investment in the first quarter of 2002 showed that the company had turned losses into profits, realizing a profit of 0.03 yuan per share and a net profit of 7.18 million yuan.

ST Swan (000418) 2002 annual report shows that the company's interim earnings per share from 0.04 yuan to the end of the year -1.15 yuan, the net profit also from the mid-term profit of 16.28 million yuan to the end of the year-418 million yuan of huge losses. A large number of bad debt losses and inventory depreciation losses were important reasons for the losses in 2002. The 2002 annual report showed that the company's receivables and inventory were subject to impairment provisions of up to 450 million yuan and guarantee losses of 139 million yuan. At the same time, due to retrospective adjustments, not only the profit of 23.17 million yuan in the company's third quarter report turned into an annual loss, but also the 2001 performance also changed from a profit of 26.83 million yuan to a loss of -57.5 million yuan. Not only did he wear the ST hat, but he was also dealt with a special warning of delisting risk-* ST Swan. In addition, Little Swan's quarterly report for the first quarter of 2003 showed that the company had turned losses into profits, with a net profit of 29.41 million yuan and an earnings per share of 0.08 yuan, an increase of about 61% over the same period last year.

If it is said that Yinlu Investment, Little Swan and other companies are suffering from "slimming" in order to move forward with light weight in the coming year, there seems to be a little positive meaning, and even more so to pay for the major shareholders. ST Qingqi stated in its 2002 annual report that the major shareholder Qingqi Group has continued to deteriorate in the fierce market competition and has been unable to repay the company's related arrears. In order to fully disclose the risks, the board of directors has made a full provision for the corresponding account bad debts. The bad debt provision of 3.4 billion yuan was as high as 4.2 billion yuan, which is amazing.

Companies like this are endless. Facts have shown that the provision for asset impairment reserves has become a weight for companies to adjust their profits and can be changed at will

Provision for impairment

Accounting policies have also become commonplace. The company uses some policies to achieve its goals according to its own needs. In fact, the ultimate victims are still investors. Some companies have only scratched the surface of the major accounting errors that occurred in the announcement. For example, the Little Swan Company's 2002 annual report showed something like "Due to a major accounting error in the calculation of 2001 operating expenses, retroactively reducing the 2001 net profit of 85.24 million yuan" and the like.