Financial Derivative Instruments Accounting Research

With the widespread application of innovative financial instruments in the international financial markets since the 1980's, the issue of accouting recognition,measurement and disclousure of financial derivative instruments has become a new subject of investigation in accounting theory and practice.This thesis, in line with current demand, starting with a review of the relative achievements of FASB(Federal Accounting Standard Bureau) and IASC(International Accounting Standard Committee) in the area of financial derivative instruments accounting, combining with the opinions of some Chinese scholars, has a systematic discussion of the accounting recognition.measurement and disclosure of financial derivative instruments.The major issue in financial derivative instruments accounting research is their accounting treatment including their recognition,mearsurement and disclosure.the purpose and significance of conducting Financial instruments research are to provide theorefical implication and operational regulation for their development in China,the control of their transaction and the adjustments to the dificiencies of traditional accounting theories and modes.Financial derivative instruments are contracts to be executed in the future. The rights and responsibi-lities of both the parties concerned don't match the assets and debts in the traditional meanings,for the financial assete and debts occurred in financial derivative instruments tranactions are virtual,that is, they gives not caused by the "past events".this gives rise to some difficulties in the accounting recognition of financial derivative instrumentsjn fo'rm.they don't fall into the recognition standards of the "right-responsibility-occurrence";while taken from the principle of "contents above forms", "the risks and benefits of financial derivative instruments transactions have been transferred" and "whether the transactions have fininshed or not" is no longer the only element to be taken into consideration.Therefore.the basis for the accounting recognintion of financial derivative instruments should be changed from "the seulement time" any more,but based on "the concluding time (of transactions)", so as to make the financial assets and debts ocurred in transactions recognized respectively as enterprise assets and debts and measured as on-sheet contents.The final recognition of financial derivative instruments should take "theseperation of the transferer of the financial assets and the transferred assets" and "the seperation of the undertake of financial debts and financial debts" respectively as additional conditions to the final recognition of "end of control" and "end of responsibility".Due to the uncertain characteristics of financial derivative instruments, the historical cost measurement approach has certain limitations in handline financial derivative instruments,we finally adopt the fair value measurement approach to measure financial derivative instruments.However, at present stage, the fair value measurement approach can not handle the pricing problem of financial derivative instruments which are not circulating on market. And therefore the historical cost measurement approach and the fair value measurement approach should be jointly employed. But financial derivative instruments measured with these two different approaches should be reflected in the disclosed information. In addition, due to their leverage financial derivative instruments transactions bear great riske, and this makes it necessary to objectively disclose financial derivative instruments information by combining the on-sheet and off-sheet contents.Take the transfer of corporate bonds as an example for their accounting treatment, separate accounts should be set up and particular methods should be employed. Because this kind of equity transfer is a special kind of stock future, the investors should set up "stock future cost account" and the issuers "expectde benefits accounf'for its accounting treatment.In reference to the current situation and trend of financial derivative instruments development in China and on the basis of analysing China's accounting policies concerning financial derivative instruments some concrete suggestions on how to conduct financial derivative instruments accounting in China are put forward: First.to accelerate the establishment of relevant accounting policies concerning financial derivative instruments and make prompt necessary and adjustments to the existing principles of accounting recognition, measurement and disclosure of financial derivative instruments. So as to provide instructions to the operation of accounting in China; Second, to build up and enhance the supervisionary system and measures of financial derivative instruments; and last,to strength the training of professionals in accounting to improve their work performance and professional quelification.