Research On The Hedge Accounting Of China

With the rise of financial innovation and financial liberalization, derivatives have also been rapidly developing. Due to the need of risk management, more and more enterprises have been using a variety of derivatives to hedge. So hedge in business increase rapidly. In order to better reflect the strategies and outcomes of risk management by the use of derivatives, hedge accounting was born. Hedge accounting uses specific accounting treatment, matching the hedging instrument and the hedged. So it can hedge both gains and losses, and thus reasonably reflect hedging activities results of an enterprise. Due to excessive restriction, narrow scope of application or some other reasons, hedge accounting’s application is limited and cannot comprehensively reflect effectiveness of risk management since the financial crisis of 2008. So it was widely criticized. After, IASB and FASB take positive action, trying to make comprehensive amendments to the hedge accounting. November 2013, IASB has released the latest set of hedge accounting guidelines.As an emerging market economy, China’s hedge accounting standards started late, but developed rapidly. In 2006, "Enterprise Accounting Standards" was promulgated, which "Enterprise Accounting Standards No. 24 – Hedge accounting"(CAS24) was consistent with the IAS39 published by IASB. CAS24 achieved the convergence of hedge accounting standards between China and the world. However, with the development of economy, especially after the financial crisis in 2008, China hedge accounting appears more and more problems in the application, hindering corporate hedging and other risk management activities. And China hedge accounting standards need to be reformed.This paper uses standard research method to explore the problems of hedge accounting standards and its applications. According the problems, I put forward my views and suggestions in order to contribute my efforts to improve hedge accounting for China.This paper is divided into four chapters: The first chapter mainly introduces the background and significance of hedge accounting research and research status; the second chapter is some presentations related hedge accounting, introducing the hedge accounting concepts and China hedge accounting; the third chapter, describes the hedge accounting status and main problems by analyzing China’s Shanghai and Shenzhen financial and mining companies; Chapter IV, I made some suggestions for the application of hedge accounting in China, including a moderate expansion of the scope of the hedging instrument and the hedged item, simplifying the evaluation of the effectiveness standards, improving information disclosure for hedge accounting, strengthening external support.The innovation of this paper is the use of statistical data analysis of China’s listed companies, discovered and summarized in our hedge accounting problems in enterprise applications. Based on these problems, I put forward some practical recommendations on how to reform our hedge accounting. Of course, there are many shortcomings of this paper, I only chose two industry listed companies may not cover the whole use of hedge accounting. Moreover, due to the complexity of financial instruments, it has not been studied for the accounting treatment of specific hedging instruments.