The Construction Process and Effectiveness of the Asset Impairment Standard System in China

Abstract

During the past decade, criterion system of impairment of Assets has experienced a process from scratch and scattered to highly-developed in China. So far, “Accounting Standards for Enterprises No. eighth -- Asset Impairment ” has been implemented for nearly five years, and listed companies had compiled interim and annual reports during the 2007-2011 period which experienced a good condition overall. It is a significant breakthrough in the processing of accounting standards and accounting system, which constructs and consummates the system of asset impairment standard, require enterprises to reflect the value of the asset fairly and prevent inflated profits from property price foam. Introduction In recent years, the International and the domestic practice indicates that, in order to reflect the true value of the assets reliably, so as to improve the quality of accounting information, and reduce the uncertainty in decision-making, relevant accounting standards for recognition, measurement and presentation about asset impairment must be developed and implemented. During the past decade, criterion system of impairment of Assets experiences a process from scratch and scattered to highly-developed. In February 15, 2006, Ministry of Finance of the People’s Republic of China issued the "Accounting Standards for Enterprises No. eighth -- Asset Impairment" (Ministry of finance, PRC, 2006a), which regarding as the complete establishment of Chinese asset impairment standard system. Based on the experience of formulation and implement the accounting system and accounting standards, the Ministry of Finance drew some lessons from international accounting standards, and adopted the mode of “basic standard of impairment of Asset commanding other relative individual specific standards” to build asset impairment standard system, which has strong international significance.