This study employs an approach to investigate discontinuities in the distributions of earnings and examines whether firms use asset sales to avoid reporting losses. The sample includes 7482 firms-year observations from the Database of Taiwan Economic Journal for the period of 1984-2003.The findings suggest approximately 55%-58% of firms with small pre-managed earnings losses manage earnings to show small positive earnings. The study also finds firms time asset sales to avoid reporting losses. In particular, in condition of reporting operating losses, firms are more likely to boost asset sales to avoid reporting net losses.