A Study On Impairment Model Of Financial Assets Mainly

The measurement of financial instrument has been plagued with scholars and accountants because of its complexity and diversity. Especially after2008financial crisis, it is an inevitable trend to modify the current impairment model to overcome its defects exposed in the crisis, among which deferred impairment loss recognition and pro-cyclical effect are the key problems. According to the research conducted in this paper, it is obvious to see that China’s corresponding impairment standard has encountered the same problems as well, after the substantial convergence with international accounting standard in2007. Expected credit loss model will pose a great effect on China’s accounting standard and practice due to the international reform and our convergence policy.This paper deals with the problem of financial asset impairment model in a normative way, combined with simulation study, statistical analysis and comparative analysis, and analyzes the reasons and contents of the impairment reform on a basis of the latest international publication.The research design of this paper is through the way of introducing topic, analyzing issue and solving problem. The topic-introducing section consists of the first and second chapters. The first chapter makes a general introduction of research background and reviews previous researches, the second explores the theoretical foundation of financial asset impairment study, and both of which draw forth the main topic of the paper and clarify the research line. The issue-analyzing section includes chapter three, which studies the current situation and existing problems of incurred credit loss model and explains the reasons of the reform. The problem-solving section is made up of chapter four and five. Chapter four introduces the international moves on impairment of financial assets, reform process, and current achievements, which reflects a process from ideal to practical, from cooperation to disagreement. Chapter five illustrates the limitation on application of expected credit loss model in China. Considering the present national conditions, the paper provides advices on the reform. Through theoretical and simulation analysis done in this paper, it can be concluded that expected credit loss model does have its advantages over the current model, but the limitations, imposed by China’s current capital market, risk management and rating system, renders the new model not suitable, and will incur a large amount of implementation cost. Consequently, it is necessary to take a cautious attitude towards the international reform.The main innovation of this paper lies in the following two aspects. Firstly, it is based on the latest events and publications, including the analysis and evaluation on the2014accounting standard, which provides the latest views on the reform. Secondly, the new model is still under development. Without the data provided by annual reports, most researches are conducted on theory reasoning. This paper includes an imitated scenario to analyze the feasibility of new model that provides a more visualized understanding. The shortcomings of this paper are shown as following four aspects. First of all, this paper intends to make a comprehensive study on reasons, feasibility and influences of new model; however, the paper is still on an initial stage due to the author’s limited personal skills. In addition, as the new model has not been used yet, the argument in this paper is supported by deductive reasoning and simulative case study without actual data support. Moreover, due to the working experience absence and professional restriction on bank risk management, it is necessary to do further study on that aspect whether theoretically or practically. Last but not the least, most materials quoted in this paper are in English, it is possible to make translation errors.