The Accounting Treatment Of Derivative Financial Instruments And Their Accounting Risk Research

Since 1980, the derivative has already become the indispensablecomponent of modern financial market. However, as an underlying source ofrisk, how to deal with derivatives in accounting has already become animportant subject.This paper is a normative study about the recognition, measurement anddisclosure of the derivatives. It focuses on characteristics of derivative, andanalyzes the accounting risk in faced of derivatives. By compared with theInternational Accounting Standard, Financial Accounting Standard of America,the paper put forward some solutions in the accounting process of derivativefinancial instruments.The paper use the risk management approach to analyze the accountingrisk faced to the derivative, and specified the framework of accounting riskmanagement. By presenting the case of Singapore Subsidiary Company ofChina Airline Oil lost 550 million dollars in opportunistic futures ofpetroleum, the paper discusses the method to avoid the accounting risk, andgives some advice on how the parent company and member enterprises designthe internal control system in order to manage the risk.