According to accounting principles, when the investee's recoverable amount is lower than its book value due to deterioration in operating conditions and other reasons, impairment provisions should be made.

The current accounting system stipulates that eight assets, including accounts receivable (including other receivables), inventories, short-term investments, long-term investments, entrusted loans, fixed assets, intangible assets, and projects under construction, should be accrued Provision for impairment. Among them, the provision for bad debt provisions for accounts receivable is made using the allowance method, and the provision for inventory depreciation provisions is made using the lower of cost and net realizable value method, and the amounts accrued are all included in the "administrative expenses" account; the provision for short-term investment depreciation provisions is Provisions are made using the lower of cost and market price. Impairment provisions for long-term investments, entrusted loans, fixed assets, intangible assets and projects under construction are made using the lower of book value and estimated recoverable amount. The three items are offset against the "investment income" account, and the last three items are included in the "non-operating expenses" account. The amount of the eight provisions will directly affect the profits of the current period, so the relevant system stipulates that no secret reserves are allowed.

The accounting system makes such arrangements to restore the true appearance of corporate assets, squeeze out the water, and reveal potential risks. However, it does not rule out that individual companies use the system to set aside impairment provisions and hide current profits.