Comparative Study On Correlated Problems In Standards For Recognition And Measurement Of Financial Instruments

The issue and implementation of four accounting standards for financial instruments lay a firm foundation for innovation and development of financial instruments in China. In this paper, the Standards for Recognition and Measurement of Financial Instruments in China are studied and compared with prescripts of IASB and FASB. The proposals to improve accounting standards are put forward after summarizing the differences among them.Through comparing and analyzing and discussing various definitions of financial instruments, this paper puts forward the viewpoint that cash is both a style of financial asset and a financial instrument, and the nature of financial instrument is a sort of agreement that the partners use for the sake of raising funds, investment, income apportionment and avoiding risks etc. to serve operating activities. Thus, the definition of financial instruments is amended. Moreover, cash should be regarded as a single sort of financial asset, and loan and payables and bonds payables should be regarded as a single sort of financial liability respectively.Through analyzing measurement attributes of financial instruments and variation treatment of fair value of financial instruments, this paper constructs the definition of realized gain or loss and unrealized gain or loss, and demonstrates that two measurements of fair value and amortized cost of a financial asset or financial liability are indispensable. Therefore, this paper puts forward three views: view of gain or loss, view of equity, and view of mixture to treat the variation of fair value of financial instruments, and it holds that variation of financial asset or financial liability at fair value through owner's equity should be alone reported in the equity part of Balance Sheet, the form of Statement of Changes in Equity should be united, and the business enterprises should fully disclose the accounting information about variation of fair value for the investment in associates, in joint ventures, and in subsidiaries which fall within the scope of consolidation, aimed to eliminate the contradiction that the higher the stockholding level is, the more irrelevant the accounting information disclosed is, when the present standards require to use the cost method, equity method, and fair value method to make business accounting for investment. Lastly, this paper summarizes the above studies and puts forward suggestions to improve the standards. And it is held that with the quick development of virtual economy, enterprises should fully understand the internal risks of financial instruments, and fully disclose the associated information; investors should realize the related risks; and standards-makers should make integrated Accounting Standards and remind investors of the related risks.