Asset Securitization And The Accounting Problems

As one of the derivative financial instruments, Asset securitization has been recently a hot topic in domestic financial theory and practice realm. It was originated, developed in USA then expanded world-widely. Specially, with the development of finance innovation technology, securities assets merge with derivative financial instruments, which makes their external forms complicated. And the derivative financial instruments become an appraisal index of development level of financial market. The appearance of asset securitization impacts the traditional financial accounting and enforces the researchers to reconsider the basic concepts of financial accounting, such as recognition, measurement and disclosure. This article starts with the fundamental features of asset securitization. Afterwards, it analyzes the challenge of above concepts faced by traditional financial accounting. Via an angle of solving the conflict between asset securitization and traditional accounting theory, this article tackles the accounting-related issues in the process of asset securitization.This article was arranged in the following four chapters:The first chapter firstly introduces the motive and background of this thesis. Then the brief structures are illustrated, in this chapter. Finally, research approaches and significance can be seen in this short preface.The second chapter presents the origination, definition, process of asset securitization together with risk analysis. Securitized Assets are made of financial pool. The periods of these assets may be fixed or repeating. According relevant terms, these assets can produce cash-flows or other rights. Meanwhile, they can guarantee high quality service or allocate earnings timely. It also describes the sorts and cash-flow of asset securitization. Asset securities include mortgage pass-through securities, mortgage-backed securities, pay-through securities and strip mortgage/collateral securities. The nature of the finance process from asset to securities is that the future cash-flow of a set of asset is divided by some mode. The diversified branches of cash-flow can meet requirements of different invest groups. Special purpose vehicle (SPV) strips the Asset by securitization. Then by adjusting the cash-flow structure of basic asset, SPV design different types of asset securities with specific cash-flow mode. During the process of asset securitization, we should pay more attention to financial, structure and law risks.The third chapter expounds the utilization of asset securitization in China. Firstly, the content introduces the practical implication of such derivative instruments. Secondly, from the theoretical aspect, it analyzes the feasibility and prospect of asset securitization in our country. And specific steps for realizing asset securitization are proposed in this chapter.The fourth chapter introduces the theory of accounting recognition, measurement and disclosure. Because of its subjunctive character, the recognition standard in asset securitization does not accord with that of traditional accounting theory. Then it illustrates that the uncertain characters of asset securitization make the traditional measurement attribute-historical cost difficult to measure it reasonably. From another apparent character - lever ability, that is, high income and risk requires the accounting statements to reflect the deal and risk fairly. Asset securitization puts forward a new challenge to traditional accounting theory, which is the basic problem to be discussed in this chapter. At last, the author raises his personal suggestion on the accounting transaction for asset securitization.