Research On Derecognizing Issues Encountered By The Sponsor Of Credit Asset Securitization In China

Since the State Council officially approved a pilot of credit asset securitization (CAS) in February 2005, the program has already had a history of nine years. As a product of the financial market developing to a certain stage, CAS is rather appealing to both originating institutions and regulatory authorities. Especially after entering the second half of 2013, the regulatory authorities have been frequently revealing the policy intent on promoting the normalization of CAS. It is foreseeable that CAS will usher in a period of rapid development period in our country. In this context, the relevant accounting rules would be considerable issues, especially so as the sponsor’s derecognizing issues, which directly related to the identification of the sponsor’s financial position and operating results, affecting the initiatives of sponsors to carry out CAS and the stability of the entire financial system at the macro level. Accounting standards should contribute to an objective and fair view of the financial position and operating results of the sponsor due to the CAS transaction occurred; they are neither supposed to be too loose nor too harsh.This article first introduces the significance and model of CAS, summarizes the status and characteristics of China’s CAS transactions based on the issued 30 products from 2005 to January 2014; then sorts out and evaluates accounting standards issued by FASB and IASB/ IASC in terms of special purpose entities combination and derecognizing criteria; based on the international experience, this article reviews the relevant accounting standards issued by China’s Ministry of Finance, analyses on the influence of risk retention rules on the transfer of risk and reward, further explores the derecognizing rules of our country through two cases, and compares the economic consequences of different risk retention rules around the No.21 Article on the sponsors; Finally, draws a conclusion of the whole article, and proposes suggestions on improving our accounting standards.China’s current CAS transactions are still simply structured and of high similarity, so the accounting treatment of subsequent CAS transactions may have been referring to the existing cases. But as the CAS transactions became complex and diversified, this would undoubtedly be improved. In addition, with the IASB revising on IAS 39, our ongoing convergence of accounting standards would be facing new pressure. This Article summarizes international accounting standards issued by FASB and IASB/IASC, analyses China’s related accounting standards and regulatory system and their economic consequences in terms of the characteristics of China’s current CAS transactions; it has certain significance on China improving derecognizing accounting standards to better reflect the operating results of sponsors and thus to guide CAS transactions develop in a healthy way.