On Derivative Financial Instruments Measured At

This paper begins with the emergence, development, and features ofderivative financial instruments, and then places an emphasis on the study ofmeasurement of derivative financial instruments.Ever since 1970s', with the development of economy and society,derivative financial instruments have been developing rapidly. Due to theirspecial features, derivative financial instruments not only brought greatinnovation to finance field, but also had a far-reaching impact on traditionalaccountancy. According to the traditional accounting theory, derivativefinancial instruments should be disclosed outside the financial statements,instead of being defined and measured inside the statements, which cannotmeet the requirements of information users. Therefore, a plenty of studies onaccounting for the derivative financial instruments have been made infinancial accounting standards of all over the world, including internationalaccounting standards. All of them experienced two stages, the first of whichis to disclose as items outside the financial statements, and the second ofwhich is to define and measure as assets or liabilities. In the 1980s, with thedeepening of economic innovation and opening-up of financial market,derivative financial instruments began to emerge in China. In 2001, Chinabecame a member of WTO, which provided a good chance to thedevelopment of derivative financial instruments market, and also required toregulate the accounting system of derivative financial instruments. On Feb15, 2006, four accounting standards about financial instruments weredeclared, and they will be implemented by the issuing companies on January1, 2007. Measurement is the key of accounting standard of derivativefinancial instruments. Nearly every country requires to measure derivativefinancial instruments by fair value. Then, compared with other measurementattributes, what advantages and disadvantages does fair value have? Is fairvalue necessary and feasible? What efforts does China still need to make tocarry on the fair value measurement?This paper is targeted to provide some feasible suggestions for thesmooth implementation of accounting standards of derivative financialinstruments, and forecast the prospect of the application of fair value.