Empirical Research on Debt Restructuring Gains in China’s Listed Companies

Abstract

China’s　Ministry　of　Finance　issued　New　Accounting　Standards　of　debt　restructurings　in　2006.　According　to　the　new　standards，　fair　value　was　introduced　again　and　debt　restructuring　gains　were　recognized　as　non-operating　income.　This　paper　uses　empirical　study　to　discuss　the　correlation　between　debt　restructuring　gains　and　financial　indicators.　This　paper　selects　2009　A-Share　listed　companies　on　Shanghai　and　Shenzhen　Stock　Exchanges　as　research　sample，　using　descriptive　statistics，　linear　regression　analysis　and　paired　samples　T　test　analysis　to　identify　the　influencing　factors　of　debt　restructuring　gains.　Based　on　the　research　conclusions，　the　paper　proposes　corresponding　suggestions　to　improve　debt　restructurings　standards　and　perfect　accounting　supervisory　system.

Key　words：　debt　restructurings；　accounting　standards；　China’s　listed　companies；　gains；　empirical　research

Luo　Xuemei，　Gao　Yuan　（2012）.　Empirical　Research　on　Debt　Restructuring　Gains　in　China’s　Listed　Companies.　Canadian　Social　Science，　8（5），　-0.　Available　from：　http：///index.php/css/article/view/j.css.1923669720120805.ZT0302 DOI：　http：///10.3968/j.css.1923669720120805.ZT0302.

Introduction

China’s　Ministry　of　Finance　issued　New　Accounting　Standards　of　debt　restructurings　in　2006-Accounting　Standards　for　Enterprises　No.　12：　Debt　Restructuring，　for　the　purpose　of　regulating　the　recognition　and　measurement　of　debt　restructuring，　and　disclosing　of　the　relevant　information.　This　new　issue　will　improve　financial　reporting　and　accounting　standard　system　by　creating　greater　consistency　in　the　way　GAAP　is　applied　for　debt　restructurings.

So　far，　China’s　Accounting　Standards　of　debt　restructurings　have　evolved　through　three　stages：　first　published　in　1998，　significantly　revised　in　2001，　and　reissued　in　2006.　Two　core　issues　were　involved　in　the　evolvement　of　debt　restructurings　standard：　the　recognition　of　the　debt　restructuring　gains　and　the　choice　of　measurement　attributes.　The　debt　restructurings　standard　of　1998　first　introduced　the　fair　value，　allowing　the　debtor　to　include　the　difference　between　the　book　value　of　the　debt　to　be　restructured　and　the　fair　value　of　the　non-cash　asset　transferred　into　the　current　profits　and　losses.　However，　since　the　domestic　capital　market　and　property　rights　market　were　immature　at　that　time，　the　fair　value　approach　was　difficult　to　be　used.　Debt　restructurings　standard　had　to　experience　vital　revision　only　two　and　a　half　years　after　its　first　issue.　The　revised　standard　of　2001　recorded　the　gains　on　debt　restructurings　as　capital　surplus　rather　than　as　profits　and　losses　in　the　current　period　with　the　fair　value　fading　into　the　background.

With　the　increasing　development　of　market　economy　and　steady　perfection　of　capital　market，　debt　restructurings　standard　was　amended　by　Ministry　of　Finance　in　2006.　In　the　latest　standard，　there　were　mainly　two　changes：　Firstly，　the　fair　value　measurement　was　introduced　again，　which　replaced　the　old　criteria　of　the　“book　value”；　secondly，　debt　restructuring　gains　was　no　longer　included　in　capital　surplus，　but　recognized　as　non-operating　income.

On　one　hand，　the　new　regulation　creates　greater　consistency　in　the　way　GAAP　deals　with　debt　restructurings；　on　the　other　hand，　the　regulation　leaves　room　for　profit　manipulation　for　China’s　listed　companies.　The　existing　domestic　and　foreign　research　is　limited　to　theoretical　analysis　and　prediction，　which　lacks　empirical　study.　On　the　basis　of　previous　research　accomplishment，　this　paper　goes　beyond　the　purely　theoretical　approach，　using　empirical　study　to　discuss　the　correlation　between　debt　restructuring　gains　and　listed　companies’　financial　indicators　and　to　identify　the　major　factors　influencing　debt　restructuring　gains.