Creative accounting practices of listed companies

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Creative accounting practices of listed companies

Summary of listed companies in the grasp of creative Accounting Behavior Based on the analysis of the causes generating creative accounting practices, the further behavior of listed companies accounting measures. Creative accounting practices to eliminate, it is necessary to carry out acts of creative accounting firm to pay the price, to minimize the possibility of profit by the act. Keywords creative accounting accounting practices of corporate governance of listed companies in China 1 Behavior creative accounting creative accounting is not clearly defined in the field of accounting policies, a conscious effort to beautify the financial position or high corporate earnings reports. In our country, because of some special regulatory provisions, the company's motivation for creative accounting in addition to protecting corporate image, maintaining stock, reflecting the business performance management, there is increased price of the stock issuance, eligibility for allotment to avoid the company suspended, delisted and so on. China's financial accounting system is not very well, and our listed companies to improve the quality of accounting information, Financial Ministry also issued new regulations continue to allow enterprises to choose, which also provides the creative accounting of listed companies the opportunity to act. Often use creative accounting Listed companies, including the practice of creative accounting is usually smooth earnings, Stocks, off-balance sheet financing, etc.; listed companies in China to use more specific accounting methods include abuse of purchase accounting,[link widoczny dla zalogowanych], any changes to Calculation, manipulation of the consolidated financial statements, balance replacement and so on. For example, in 2003, TCL Communication and its parent company TCL Group's convertible merger, the combination of using the equity accounting method rather than the commonly used face value. According to calculations, the combination of convertible combination of the interests of law in regard to yield also increased significantly, enabling a future refinancing of its behavior. In fact, TCL's acquisition of behavior occurred in our country is very common among listed companies. The creative accounting practices of listed companies has become almost the accounting practice is not uncommon for the standardization of operation. 2 creative accounting system behavior because the causes of 2.1 creative accounting practices occur most fundamental reason is the accounting practices. The company's business practices are carried out continuously, and these business accounting measurement, recording, accounting and reporting is intermittent. This led to the timeliness of accounting information on the one hand, authenticity has to be created from this period of time the user access to a large part of the loss; on the other hand, the listed company's management can not by investors under the supervision of the creation of the act in its own interests --- because they only need to happen for a long time after the ambiguous statement to report the matter to investors. In short, the production of accounting information and reports to the discontinuity between the creative accounting practices of listed companies the opportunity to provide the time. In addition, the accounting practice requires the use of quantitative description of the exact number of economic activities to the many qualitative behavior of the fuzzy operations, which gave listed companies to provide a space for creative accounting practices the opportunity. Listed companies reduce the risk of creative accounting practices is to improve the accounting system the main method. For example, Britain has issued a report Card Burleigh, Late Man reports, reports and Ham Green, Berle Per report and finally in 1998 formed a Corporate Governance Committee's consolidated guidelines require the company to enforce compliance. In China, the accounting system also continued to establish and perfect the process. Inadequate accounting system, the relevant employees are not high quality creative accounting led to China's market behavior in the frequency of the external factors. 2.2 Company's subjective motive creative accounting information Economics will be parties to the transaction market, access to information inconsistent with the phenomenon known as asymmetric information. Adverse selection, asymmetric information exists, the party access to information for the use of information superiority excess profits. And market behavior in the presence of adverse selection will eventually lead to phenomenon. Managers within the company have more information than outside investors, and investors who rarely understand the true behavior of company. Few can understand a company competitors have been or will be the real details of the action taken. Therefore, we can second-hand car market is similar to the framework, the use of game theory to analyze the company's intrinsic motivation of creative accounting practices. First, we analyze the behavior of the company for the purpose of creative accounting. Listed companies is the ultimate goal of such acts want the confidence of investors, can survive in the capital market and get as much financial support. But in the particular point in time, capital markets can provide a limited number of funds, listed companies must take all possible means to compete for investor confidence and subsequent investment. Because of information asymmetry, most investors understand a company can only come from accounting information. Companies engaged in legitimate business as long as no illegal activities, financial statements reflected the strong profitability and long-term stability, investors will tend to hold shares of the company. Creative accounting information asymmetry is the possibility of the existence of acts, and investment in listed companies will have to get the urge for creative accounting. Here, we recorded acts of creative accounting company expected total revenue for the ER. As rational economic agents, listed companies will also consider the potential cost of creative accounting. Although the creative accounting is the accounting system of the gray areas will not conflict with existing law, but in a certain probability p, the listed company will have lost L. This is mainly reflected in the investor because of inaccurate accounting information of listed companies and listed companies the cost of litigation between the LL, the relevant regulatory authorities in the event of the punishment LP and the capital market after these listed companies neglected LC. Then, the expected cost of listed companies EC = pL = p (LL + LP + LC), assume that the expected return of listed companies for the ER, is expected to net income of ENR = ER-EC.