The Research On Accounting Treatment And Information Disclosure Of Listed Banks’Financial Products

In recent years with the intensive competitions between banks and the rapid development of financial disintermediation, financial products in commercial banks are featured with increasing types, expanding numbers of transactions and growing impacts on banks’operating results. Financial products have the characteristics of structural complexity, type variety and operational processes diversity etc., thus bringing a series of new challenges for the practice of management, accounting procedures and information disclosure. Once the possessed potential risk characteristics of financial products turns into real risks, it might bring commercial banks great economic losses. As one aspect of reflection of real economic transactions of banks and their operating conditions, the current accounting treatments and information disclosure of financial products in bank industry still has a lot of potential improvements to accomplish, thus failing to provide adequate and effective information for investors and regulatory authorities. Therefore, how to regulate the accounting treatment and information disclosure of financial products and to better prevent financial risks and promote the wealth management business development, has become the industry’s one of the hottest issues to be solved.Currently mainly the practitioner in bank industry gave some brief introduction and discussion on accounting treatment and information disclosure of financial products, lacking a systematic perspective and a theoretical interpretation. This paper comprehensively sorts out and analyzes the current issues related to accounting treatment and information disclosure of financial products. Through systematical statistics and analysis of3-year financial reports information of16listed banks in China, the paper summed up the main problems with respect to the current accounting treatment and information disclosures in bank industry. First of all, for accounting treatment purpose, the raised money for capital preserved financial products are reflected in financial liability measured at fair value through profit of loss,deposits or other liabilities, while the invested assets are reflected in financial assets measured at fair value through profit or loss, loans and receivables, financial assets available for sale or other assets; the collected money by structured deposits are classified as financial liability measured at fair value through profit of loss, deposits measured at fair value, deposits measured at amortized costs or split into deposits and embedded derivatives; the suspended payments of non-capital preserved financial products are included in other liabilities, or absorbed deposits. The excessive freedom in choice of accounting policies has many problems, such as non-consolidation of those special purpose trust which satisfies the definition of "control"; the nature of assets and liabilities and the nature of profits and losses are not matched; different treatments reduces the comparability of net interest income indicator; the fact that banks take into consideration of deposit and loan ratio in selecting accounting policies undermines the neutrality of accounting information; some methods does not comply with the economic substance or generally accepted accounting principles in preparing financial reports. Secondly, for the information disclosure purpose, the disclosed content is not sufficient and not in depth, especially insufficient risk information; the disclosure format is not unified and not standardized, such as off-balance sheet items "non capital preserved financial products",and the disclosed items of fees and commissions highlighting the advantages and ignoring weaknesses; reliability and comparability of the information that has been disclosed should be improved, such as some banks’notes information conflicts with management discussion, pre year and post year information lacks due comparability and some financial products’actual operating condition disagrees with financial report information. In response to the above problems, the paper puts forward the corresponding countermeasures and suggestions. Firstly, according to International Financial Reporting Standard No.10-Consolidated Financial Statements and our related ED proposals, those structured entities that meet the definition of "control" should be consolidated; under CAS22-Financial Instruments:Recognition and Measurement, the capital preserved financial products should be accounted as financial assets and liabilities measured at fair value through profit or loss; under CAS22-Financial Instruments:Recognition and Measurement, structured deposits should be classified as financial liabilities measured as fair value through profit or loss. Secondly, considering the characteristics of accounting information of financial products, combining International Financial Reporting Standard No.12-Disclosure of Interests in Other Entities, International Financial Reporting Standard No.13-Fair Value Measurement and related exposure drafts in our country, the paper systematically puts forward the disclosure content and format from the perspective of the interests in consolidated structured entities, interests in unconsolidated structured entities, the accounting policies of financial products, financial assets and liabilities measured at fair value through profit or loss, off-balance sheet item non capital preserved financial products, the fair value description and management discussion. Finally, in addition to improve the relevant accounting standards, efforts should be made on improving banks’internal control system and risk management, strengthening CPA audits, strengthening government supervision, promoting investors’protection to fulfill and guarantee the quality of accounting standards implementation, and on accelerating the interest rate liberalization, improving deposit loan ratio and other financial reform perspectives to promote the healthy development of financial innovation and bank industry transformation.This paper is divided into five parts. The first part is the introduction section of research background, significance and summaries of research status at home and abroad. The second part is the outline of financial products, clarifying financial products’definition, classification, development status, reasons of large-scale outbreak of financial products in recent years and main problems. In the third part, the paper describes the status quo of the accounting treatment and information disclosure of financial products, according to China’s16listed banks3year financial reports. In the4th part, the paper summarizes the existing problems in the current accounting treatment and information disclosure of financial products. The5th part presents a detailed analysis of the accounting treatment and information disclosure suggestions for the problems identified. In the6th part, the paper brings forward improving accounting standards and their supporting measures to promote the healthy development of financial products in multi-level perspectives.