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1 Introduction
In June 2009, the Ministry of Finance issued the Accounting [2009] 8 on a notice of the issuance of Accounting Standards No. 3, which required that all listed companies should disclose "other comprehensive income projects" and "comprehensive income" items under the items of "earnings per share" in the income statement. "Other comprehensive income" mainly reflects a company's net profits and losses after deduction of income tax effects which are not confirmed in profit or loss provisions in accordance with Accounting Standards. The companies are required to disclose in detail each item of other comprehensive income, their income taxes, the original amount included and the amount transferred to the profit and loss, etc. in the Accounting Statements Footnote notes. This provision consists with the requirement "a separate disclosure of other comprehensive income, including gains and losses to be credited directly to equity which are required or permitted by IAS" in IAS1.82 and the provision in IAS1.7 that comprehensive income includes net income and other comprehensive income and each item of other comprehensive income should be listed directly in the income statement. The similarity greatly enhances the convergence between the Domestic Accounting Standards and International Accounting Standards. However, we have no idea about whether the disclosure of other comprehensive income has effectively improved the transparency of listed companies' information and to some extent curbed earnings management. This paper, with the application of the modified Jones model and the multiple regression analysis method, is written to verify the issue, hoping to supply some reference value to users of financial statements and the relevant government departments.
2 Literature review
2.1 Theory
In commercial transactions, some people may have informational superiority over others. If that is the case, information asymmetry will appear. Adverse selection is a kind of reflection, such as inadequate information disclosure misleading investors about the real state of a company. For the current low quality of accounting information disclosure in our country, a large number of scholars believe that low quality is derived from accounting fraud and profit manipulation. However, we must clearly know that overused earnings management is the real "hotbed". Asymmetric information is root of accounting information problem, which has also provided space for earnings management. Earnings management is contrary to the principles...