Derivative Financial Instruments, The Accounting Problems

Since the 70s of the 20C, risk and fluctuation in financial market sharply increased because of the disintegration of Bretton Wood Monetary System, fluctuate exchange rate system replaced fixed exchange rate system, oil crisis and other reasons increased the fluctuation. So financial departments, enterprises and individuals urgently need a new way to elude risk or reduce the cost of capital. Under this circumstance, financial derivative instruments emerged as the time required.Financial derivative instruments contain huge risk meanwhile it can spread risk and reduce the cost of capital. In recent years, so many companies bankrupted because of the transaction with financial derivative instruments. Under the tragedy, the whole society laid their attention more and more on the responsibility of accounting. Virtually, all the disputed about the financial derivative instruments were the disputes about how to reflect the real essence of the transaction of financial derivative instruments.As an article studies financial derivative instruments accounting, it was departed into five chapters. The first chapter mainly introduces the reason why it appeared, its definition, classification and characters. The second chapter introduces the development of accounting standard about financial derivative instruments aboard, also expatiate the development phase of accounting research about it in China. The third chapter mainly illustrates financial derivative instruments' recognition, and gains the conclusion that it should be recognized under the recognition standard. The fourth chapter studies the measurement of financial derivative instruments, and drew more attention to the fair value, which is more relative to it. The last chapter puts emphasis on the problem of reporting, and discusses how to disclose and present financial derivative instruments efficiently and effectively.