Impairment Accounting Practices of Chinese Companies: An Exploratory Case Study

Li, Mei
Xu, Gina
Kabir, Humayun
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Master of Business
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Auckland University of Technology

Asset impairment accounting is challenging for many businesses globally. This study aims to provide insight into the practice of asset impairment in China. This study is informed by the theory that financial reporting quality is jointly determined by accounting standards and the institutional environment of accounting, such as legal and political system, capital market development, and accounting education level. This study employed a qualitative research method to collect data from semi-structured interviews with four Chinese accountants and publicly available financial statements. This study finds that the application of asset impairment does not fully comply with the Chinese Accounting Standards 8 Assets Impairement in terms of determining impairment indications, applying asset groups, estimating recoverable amount, and presentation and disclosure. The possible reasons have been discussed from perspective of China’s institutional environment in terms of the legal and political systems, capital market development, and accounting education and training. This study contributes to both the academic and professional arenas. It is the first qualitative research aiming to understanding the the implementation and practice of CAS 8. It also highlights the practical challenges faced by Chinese accountants and asks for the issuance of appropriate guidance. In addition, it reveal the difference between their practices and the requirements of CAS 8 which used to be neglected unintentionally by Chinese accountants.

Asset impairment , Chinese company , Legal system , Institutional environment , Education and training , Capital market development
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