Research On The Revision Of Accounting Elements Based On The Basel Accords

The 2008 financial crisis has exposed the material defects of global financial systems. Afterwards, "Basel ?" has been released, reflecting the new thinking of combining micro-prudential regulation with macro-prudential regulation. The IASB and FASB joint convergence projects, such as financial reporting conceptual f ramework and financial instruments accounting standards, have launched. The process of achieving a single set of high quality global accounting standards has accelerated. China has taken active part in and achieved continually converging with internation al financial and accounting standards. Hence, this paper helps financial reporting conce-ptual framework better reflect the reality of economy and finance in theory, and it also promotes micro-prudential and macro-prudential regulations in practice.Basel Accords are important criterions for financial prudential supervision, and accounting elements should contain all the objects of financial prudential supervision. Financial regulators are the primary users of financial reporting; both accounting and financial supervisions are facing serious challenges. Thus, the content and quality of useful financial information must reflect the requirements from financial prudential supervision. In fact, Basel Accords, from Basel ? to Basel ?, have put forward specific requirements for what should be reflected by financial reporting. T he implementation speed, scope, standard and effect of Basel Accords in a certain economy depend on to what extent its accounting practice meets the requirements from Basel Accords.This paper argues that, the concepts of balance sheet elements should have con-siderable flexibility in order to help emerging off-balance-sheet business and derivatives promptly transform from being disclosed off balance sheet to being recognized on balance sheet. The definitions of assets and liabilities should consider the nature of off-balance sheet business and financial instruments. The definition of equity should reflect the differences between liabilities and equity instruments, as well as the nature of equity. There should be a clear distinction between the definition s of "Other Comprehensive Income" and "Total Comprehensive Income". Transfer of control should be the core principle of revenue recognition. Only in this way, can the definitions and recognitions of various accounting elements dovetail with each other. It can also help better reflect Asset-Liability Approach, as well as align accounting standards with financial reporting conceptual framework and financial regulation.The mixed measurement model including historical cost and fair value based on the classification of accounting elements is a historic choice, which is in line with the economic and social development. Since the 2008 financial crisis, IASB and FASB have expanded fair value option to propel the mixed measurement model to the overall fair value measurement model. However, the pro-cyclicality of fair value measurement has indicated that its economic consequences have spread from micro field to macro field, while the micro entities are neither willing nor competent to deal with systemic risk. Therefore, this paper suggests that, establish counter-cyclical accounting multipliers deriving from accounting index, as the Level 2 inputs of fair value hierarchy, to adjust the quoted prices. And referring to the counter-cyclical institutions of Basel ?, take risk adjustment into account when using the Level 3 inputs, in order to address the systemic risk caused by the pro-cyclicality of fair value measurement.