Derivative Financial Instruments Accounting Of China's Banking Industry Research

In 1970's, the end of Bretton Woods System and fixed exchange rate made the derivative financial instruments develop quickly. The dynamic nature of international financial markets has resulted in the widespread use of a variety of financial instruments ranging from traditional primary instruments, such as bonds, to various forms of derivative instruments, such as interest rate swaps. The essential character of financial instruments is a contract. The uncertainty of a financial instrument is a crush to the traditional accounting theory. It can't be recognized as an asset or a liability. Either it can't be measured by a certain amount. People can just disclose it outside the financial reports. So the use of derivative instruments has coursed a lot of financial risks and losses and coursed a revolution of financial accounting.The purpose of this revolution is to found a new accounting system to disclose and present the message of derivative instruments that is useful to decision makers. FASB and IASB did a lot of research on derivative instruments and published several accounting standards to form the market of derivative instruments. China has published the new Accounting Standards recently and made the regulation of the recognition, measurement, disclosure and presentation of derivative instruments.The article starts with introducing the definition, classification and the character of derivative instruments. The article analyzes the crush that derivative instruments bring to traditional accounting theory and finds out that we should use other accounting standards to deal with derivative instruments. Then, the article analyzes how to regulate the derivative instruments by accounting standards in recognizing, measuring, disclosing and presenting. And the article especially introduces the classic B-S Model to measure the fair value of options. The article introduces the standard about derivative instruments of the new Enterprise Accounting Standards and compares them to the IASs. At last, the article concludes the influences to banks in China.The 1st part of the article introduces the definition of derivative financial instruments. The 2nd part of the article analyzes the derivative instruments by accounting theories. The 3rd part of the article introduces the content of China's new...