Identification Method Of Accounting Statements Whitewash

　　 One Bad assets Elimination method

The bad assets mentioned here include not only the expenses to be paid, the net loss to be processed, the net loss of fixed assets, the start-up expenses and the long waiting expenses, but also the asset items that may generate potential losses, such as accounts receivable, inventory depreciation and backlog losses, investment losses and loss of fixed assets. The application of the elimination of bad assets is to compare the total amount of non-performing assets with the net assets. If the total amount of non-performing assets is close to or exceeds the net assets, it is not only that there may be problems in the continuous operation capacity of enterprises, but also indicates that enterprises have formed "asset bubbles" in the past few years because people exaggerate profits. First, the amount of increase in non-performing assets and the increase and decrease in the current period are compared with the total profit and the profit increase in the current period.

　　 Two Related party transactions Elimination method

The elimination of related party transactions refers to excluding the total business income and total profits from related enterprises. It analyzes the extent to which a particular enterprise's profitability depends on affiliated enterprises to determine whether the firm's profit base is solid and whether the source of profits is stable. If the business income and profit of a company are mainly derived from affiliated enterprises, the users of accounting information should pay special attention to the pricing policy of related party transactions, and analyze whether the enterprises are whitewashing the accounting statements with the transactions of related party transactions in an unequal exchange way.

The extension of the related transaction elimination method is to compare the accounting statements of the listed companies with the consolidated financial statements compiled by their parent companies. If the parent company consolidated the total profit of accounting statements (excluding the total profits of listed companies), which is much lower than the total profits of listed companies, it might mean that the parent company injected the profits into the listed companies through related party transactions.

　　 Three Abnormal profit Elimination method

Abnormal profit elimination is to exclude other business profits, investment income, subsidy income and extra business income from the total profit of enterprises, so as to analyze and evaluate the stability of the source of enterprise profits. When enterprises use assets reorganization to regulate profits, the profits generated are mainly reflected by these subjects. At this point, it is particularly effective to use abnormal profit elimination to identify accounting statements.

　　 4. cash flow analysis method

The cash flow analysis method refers to the comparative analysis of the net cash flow generated by business activities, the net cash flow generated by investment activities and the net cash flow rate respectively with the main business profit, investment income and net profit, so as to judge the quality of the main business profits, investment income and net profit of the enterprise. Generally speaking, the quality of the profit is not reliable without the corresponding net cash flow. If the net cash flow of enterprises is lower than the net profit for a long time, it will mean that assets that have been identified as profits may belong to the virtual assets which can not be converted into cash flows, indicating that there may be a phenomenon of whitewashing accounting statements.