First, use inappropriate accounting policies and accounting estimates to manipulate profits.
Management often manipulates profits by choosing inappropriate accounting policies and accounting estimates. Because there are many alternative accounting methods for the same transaction or event, and China's specific accounting standards have not yet involved all aspects of enterprise accounting, many listed companies use the choice and change of accounting policies and accounting estimates to manipulate profits and whitewash business performance. In practice, listed companies often use the following methods:
(A) the use of inappropriate accounting methods to account for borrowing costs
According to China's accounting standards for business enterprises, interest expenses, exchange gains and losses and related expenses incurred by financial institutions in borrowing, as well as borrowing expenses incurred during the preparation period related to the purchase of long-term assets, can be capitalized and included in the cost of these long-term assets. After these long-term assets are put into use, they should be directly included in the current profits and losses. However, in practice, many listed companies adjust their profits by abusing the accounting treatment of borrowing costs. For example, in 1997, Chongqing Titanium Dioxide listed 86.04 million yuan of loan and bond interest payable during the construction of titanium dioxide project as a project under construction, but in fact, the trial production of this titanium dioxide project began as early as 1995, and 1996 produced qualified products.
(B) improper selection of accounting methods for equity investment
China's accounting standards for business enterprises have made detailed provisions on the accounting of long-term investments. When the investment in the invested enterprise meets certain conditions such as control, joint control or significant influence, the equity method should be adopted. On the contrary, the cost method is adopted. But many companies have made articles on these two methods. When the invested company is profitable, the investment that should not be accounted by the equity method should also be accounted by the equity method. When the invested company loses money, the equity method should be changed to the cost accounting method.
(C) improper merger policy choice
Corresponding to long-term equity accounting, the scope of consolidation is included in the consolidated statements, so listed companies often adjust their profits by changing the scope of consolidation. For example, Nanyang Industrial incorporated the accounting statements of its holding subsidiary Nanyang Futures Co., Ltd. into 1996, but excluded them from 1997. The subsidiary has already lost 7 million yuan in 1996, and how much it lost in 1997 is unknown because it is not included in the scope of merger.
(d) Improper selection of depreciation method.
Depreciation method is also the most commonly used method to manipulate the profits of listed companies. Prolonging the depreciation period, from accelerated depreciation method to straight-line method, even without mentioning depreciation, is not uncommon in practical operation. For example, ST Xiang changed the depreciation method of fixed assets from accelerated depreciation method to straight-line method in the financial statements of 1995, which "helped" the company to increase its profit by 9.96 million yuan and turn losses into profits.
(five) improper use of income and expense recognition methods.
Early or late confirmation of income or expenses is also a common method for listed companies to manipulate profits. For example, Guojia Industrial agreed with an American company on February 5, 1997 to purchase the software developed by Guojia Industrial at the price of1200,000 yuan. The delivery time stipulated in the contract is June and September of 1998, and it will be accepted after quality appraisal. However, on February 25th, Guojia Industrial signed an agreement with a foreign trade company, 1997+65438, to "sell" the software at a low price of 96 million yuan, thus confirming a profit of 5 1 10,000 yuan. Obviously, Guojia Industry confirmed that the income did not meet the standard requirements before providing the goods.
Second, manipulate profits through related party transactions.
(a) the use of related parties to buy related transactions of consignment business, through reducing procurement costs, improve sales gross profit, and continue to deliver profits to listed companies.
For example, the annual report of ST Benxi Steel in 2002 shows that the main business income and net profit increased by 47.83% and 40.05% respectively. The analysis shows that the purchase amount between ST Benxi Steel and the major shareholder Benxi Steel Group is 5.407 billion yuan, accounting for 87.63% of the total purchase amount, and its operating cost ratio has decreased by 3. 13% compared with the same period of last year. The board of directors announced that the main reason was the procurement cost of raw materials. As we all know, the price of raw materials in the whole industry was rising at that time, and its announcement was obviously unconvincing, with sales of 3.4 billion yuan, accounting for 54.84% of the total sales. The analysis shows that the gross profit margin of related party transactions is 65,438+00.65%, and that of unrelated party transactions is 7.96%, with a difference of 2.69%, which increases the profit by 965,438+04,600 yuan. Through unfair correlation,
(2) The monetization of non-monetary transactions in related party transactions can avoid the constraints of non-monetary transaction standards, so listed companies try their best to monetize non-monetary transactions in such related party transactions in order to achieve the purpose of manipulating profits.
1. Listed companies use the relationship of related parties to exchange assets with lower value from related parties for assets with higher value. According to the provisions of the non-monetary transaction standards, assets with higher value will be recorded at the lower book value of the exchanged assets, and then sold at the normal market price, thus obtaining income. Or related parties donate assets to listed companies at lower prices, and listed companies sell donated assets at higher prices to obtain income. For example, Zhuhai Tianhua Group Holding Co., Ltd. and Tianhua Electric Co., Ltd., related parties of ST Kangsai, donated 38.5% and 565,438+0.5% of the shares of Tianhua Power Components Co., Ltd. to ST Kangsai for free. Although this donation is included in the capital reserve, it cannot be recognized as income. However, ST Kangsai sold some assets of Tianhua Power Components Co., Ltd. shortly thereafter, which brought the company nearly 5.7 million yuan in income.
2. Through transaction splitting, a substantial non-monetary transaction is transformed into two or more monetary transactions, and the asset replacement business that can be completed in one step is transformed into two monetary transactions: asset purchase and asset sale, so as not to be restricted by the non-monetary transaction criteria. Or increase the proportion of monetary assets paid in the transaction to more than 25% of the fair value of exchange assets, so that non-monetary transactions can be converted into monetary transactions, avoiding the constraints of non-monetary trading standards, and thus manipulating profits.
(3) Non-related transactions evade the constraints of the interim provisions and achieve the purpose of manipulating profits.
1. The related party reduces the shareholding ratio by less than 20% by transferring the equity or suspending the transfer of relevant shares, and the related party relationship is dissolved in name, and the corresponding related party transactions are dissolved. For example, Tianjin Magnetic Card Co., Ltd. originally held 94% of the shares of Tianjin Universal Pictures, but in the middle of 200 1 year, Tianjin Magnetic Card reduced the shareholding ratio of Universal Pictures to 47%. Before the middle of 200 1 year, Tianjin Magnetic Card signed a purchase and sale contract with Tianjin Universal Pictures to sell products worth 2,654,380,500 yuan to the latter, with a gross profit of 65,438+0.365,438+. It accounts for 54.6% of the profit of Tianjin Magnetic Card Co., Ltd. in 20001year. All the above sales were completed before the mid-term. At the end of 200 1, Tianjin Magnetic Card Company transferred its equity again and no longer held the equity of Tianjin Universal Pictures. Due to the above two equity transfers, the related parties have become non-related, so the huge sales will not be offset by the consolidated statements, nor will they be bound by the Interim Provisions. The part of gross sales margin exceeding 20% will not be included in the "capital reserve-related party transaction price difference", thus increasing the current income.
2. Use related party-non-related party-related party to sell assets to non-related party at a high price, and turn one related party transaction into two non-related transactions, and the related party uses other means to make up for the losses of the non-related party. Or choose the right time and then redeem assets from unrelated parties at the same high price. These two transactions become unrelated transactions, and listed companies can evade the constraints of the Interim Provisions, confirm the transaction price difference caused by selling assets at high prices, and include it in the current profits and losses. For example, ST Yi 'an Technology Co., Ltd. announced at the beginning of 2002 10 that it would sell 42 19% of its insolvent holding subsidiary to another unrelated company at a high price of 52 million yuan. As a non-related transaction, ST Yi 'an Technology Co., Ltd. easily obtained a total of about 52 million yuan of non-operating income. It can be described as "taking the right way."
3. Use potential related parties to "transfuse blood" for the company, conduct unfair price transactions before officially entering the listed company, and indirectly control the listed company through multiple shares after the transaction is completed and before officially entering the listed company to become a related party. Because there is no related party in the legal sense at the time of transaction, it is justified to supervise related party transactions and improve performance.
Third, use the protection and support policies of local governments to manipulate profits.
In order to prevent local listed companies from losing their valuable listing qualifications, many local governments subsidize and help enterprises through tax incentives, local financial subsidies, interest reduction and exemption, and asset value preferential policies. Some companies have also received huge subsidies and achieved the goal of turning losses. For example, 1997, with the consent of the people's government, the Finance Bureau of Urumqi, Xinjiang, gave the listed company a financial subsidy of1550,000 yuan in cash, and the subsidy income accounted for 48.05% of the pre-tax profit of Xinjiang Friendship. With this "help", Xinjiang amicably realized the rights issue of 1998, and the three-year return on net assets were 10.2 1%, 10.03% and 10.47% respectively.
Four, through other means to manipulate profits
By adjusting the profit and loss of previous years, improperly calculating external liabilities, posting accounts receivable, accounts payable, other receivables, other payables and other current accounts, the profits are inflated. Enterprises will record the money that should be recorded in the current income into accounts payable by delaying invoicing or not invoicing, so as to achieve the purpose of reducing profits.
[References]
[1] Li Renhua. On the audit strategy of whitewashing accounting statements [J]. Accounting Monthly, 2002, (2).
[2] Yan Da Class 5. A study on the characteristics of financial indicators of profit manipulation behavior of listed companies [J]. Finance and Accounting, 200 1, (10).
[3] Xiao Shiqing. A study on the prevention system of whitewashing financial reports of listed companies [J]. Accounting Research, 2000, (5).
[4] Ma Yongyi. Reflections on Controlling Profit Manipulation [J]. China Certified Public Accountant, 200 1, (5).