The Research On Revision Of Financial Instruments Accounting Standards Based On Chinese Commercial Banks’ Earning Management

Enterprise Accounting Standards issued by the Ministry of Finance in2006started a new chapter in the international convergence of accounting standards in China. The subprime mortgage crisis erupted in the USA in2007has pushed the financial instruments accounting issue to the airwave of public opinion, so that the International Accounting Standards Board was force to begin a research on financial instruments comprehensive project to substitute IAS39in2009. Our financial instruments standards are rooted in standards IAS39, however before that, the relevant financial instrument accounting standards are not perfect. Researching whether the reform program of the classification and impairment of financial assets issued by IASB meet the degree of development in China’s capital market, whether China’s accounting standards should quickly follow the reform program are practically significant.In this paper, we select the data of14commercial banks from2007to2012and based on the principal-agent theory, the theory of the financial crisis, accounting conservatism principle, the requirements of prudential on banks, this paper first analyzes the classification and impairment of financial assets standards and then point out the room for earning management. Second, using frequency distribution method to confirm the existence of earnings management on commercial bank in China. Finally, we establish modified Jones’model including variables relevant to loan to analyze earning management in banks based on the classification and measurement of financial assets and loan loss provisions accounting standards by using overall accruals method. It has finally reached the following conclusions:(1) There exists earning management based on financial instruments standards in commercial bank.(2) Available for sale financial assets and loan loss provisions has a positive correlation on earning management, in which loan impairment has huge room for earnings management, large than the former. But there was no significant evidence indicated that trading financial assets and derivative financial instruments were used for earning management. Based on the above conclusions, it is necessary to improve the classification and measurement of financial instrument and the standards for loan impairment considering China’s basic national conditions to realize the convergence of Chinese accounting standards with international accounting standards step by step.