Research On The Expected Loss Model’s Application Of China’s Commercial Banks

The international accounting standards board(IASB)officially released the IFRS 9 "financial instruments" on July 24,2014, putting forward the measurement model of expected loss model into three phases. IASB completed the second phase for the reform of the impairment model and there are radical changes compared with "incurred-loss model" in IAS 39. Financial assets impairment in our country at present is the "incurred-loss model". According to China’s convergence policy with IASB, the important reform of international IFRS 9 about the financial asset impairment model will greatly impact the financial assets impairment of our country, so the relevant research about loss model theory and the practice is expected early and of great significance. Our commercial banks have the most financial instrument so it makes sense to study the impact. Nowadays, with the integration of global economic and the international trend of our commercial banks, the standard setters and regulators should make good preparation for the reform and study the probable influence to deal with the changes.This major change of the financial asset impairment model will be treated as an opportunity to adopt. This thesis uses the method of normative research, combined with a series of efforts of FASB and IASB in model reform research. The challenges and suggestions on China’s financial asset impairment criteria are explained in details. Specifically, the carding for international research process of the reform is set as the breakthrough point. Based on the whole analysis, the reform of international financial asset impairment model affects our country from different aspects. We should think deeply from the global perspective about the cause of the international financial asset impairment model’s reform. What we should do now is to grasp the newest trend of the international accounting standards and the direction of the international convergence for taking reference. Studying the problems of our existing policy through data analysis as well as the challenges of the new model’s application and figure out the suggestions. For one thing, the choice of financial asset impairment model needs to contact close with the reality of our country. The commercial banks of our country can maintain the existing approach within a certain amount of time, with the internal ratings-based approach for technical support and carefully introduce the concept of "expected loss". For another, combined with other specific accounting standards of our country, suitable reform arrangement should be established on the base of the application. In addition, this thesis puts forward the relevant suggestions. At first, we should perfect the capital market and carry forward market-based reform of interest rates to provide conditions for the accounting reform. What’s more, we should also promote the separation and coordination of accounting policy and regulatory policy, while banks should improve their level of risk management and insist on the transformation of business model. At the same time, they can use big data technology and cultivate excellent talents to strengthen the construction of information system, coping with the reform of the international financial asset impairment model.IFRS 9 is set to be used from 1/1/2018, which means there are three years to make relevant preparation. We can use the remaining time to fully consider the way that is suitable for our country’s financial assets impairment. When it enters the stage of practical application, we can collect data from the foreign banks and companies for model study. By this way, we can make good preparation for the accounting standard’s making and banks’ responding to the challenges. This thesis also points out some research aspects that worth further study. It is difficult to test practical effects of using the expected loss model because of the lack of data, so follow-up studies need to be completed.