Loan Loss Accounting Treatment And Disclosure

In the scope of world, the allowance for loan losses is one of the mostimportant reasons for bankruptcy and financial loss. Countries from all overthe world, especially those with unstable banking system, pay much attentionto this problem. Accounting for loan losses is an area of significant interest fordifferent assessors-such as bank managers, external auditors, and bankingsupervisors. The methods that banks use to account for loan losses in theirloan portfolios are of great importance for the presentation of banks' financialpositions in their financial statements. In a word, accounting for loan losses isa key point for the risk control of loan.Financial market globalization requires existing accounting for loan lossesand disclosure standards for banks to improve and become moreinternationally comparable. Sound accounting and disclosure practices forbanks' loan-loss accounting treatments can significantly affect thetransparency of the banking system, the effectiveness of supervision, and theorder of financial market. Improvements in the transparency of the bankingsystem require a uniform framework that provides timely identification,recognition, and disclosure of problem loans.China started to count and withdraw the allowance for loan losses from1988. The improvements of the banks' loan-loss accounting treatments anddisclosure practices are kept on, these improvements lead to theharmonization of international practices in this field. Now, the reform ofloan-loss allowance system is in the turning point. This thesis bases on thestudy of the related regulations, practices and developing tread from homeand abroad, and also considers the balance between bank supervision and thereliability of financial statements. From this point, the thesis analyzes theexisting problem of the allowance for bank loan losses in China, and thengives suggestions, hoping to do some help in the progress of the system ofloan-loss accounting treatments and disclosure.