Research On The Accounting Recognition Of China's Permanent Debt

Perpetual debt combines certain characteristics of debt and equity,has good elasticity for financing,whose flexibility of the system's design makes particularity of the rights and obligations.With the continuous deepening of China's financial system reform and the situation that financial regulation tends to be more prudent,perpetual debt and its auxiliary system design began to land China's capital market formally,it will become the key to promote the development of China's multi-tier capital market.As a kind of innovative financial instruments,the accounting recognition of perpetual debt has a crucial influence on its development in China.This paper will analyze and explore the problem of perpetual debt accounting from the perspective of financial liabilities and equity tools,combining the terms of its core contracts.Perpetual debt is defined as a capital security that has no expiry date or has a very long term.There are two types of perpetual debt in China:Renewable bonds and Perpetual notes.The core issue of perpetual debt accounting recognition is the attributive judgment of financial instrument,namely,financial liabilities or equity instruments.First,this paper discovers the concept of debt and ownership interest from the Financial Conceptual Framework.It then constructs the Framework Chart of Financial Instrument Attribute Judgment based on the Accounting Standards,and distinguishes the financial liabilities and the equity instrument.This paper has carried on the descriptive statistics for the permanent debts.It analyzes the classification of perpetual debt accounting based on its core terms such as redemption clause(renewable clause),interest clause and so on,and built the Flow Chart of Perpetual Debt Attribute Judgment,which can make the complicated contract terms into the simple and intuitive accounting language.In this paper,we select the two issue of Wuhan subway permanent debt:"13 Renewable Debt of Wuhan Metro" and "16 Perpetual notes of Wuhan Metro" as the research object,the former is China's first permanent debt,classified as a financial liability,recognized as a liability;the latter is the latest perpetual debt in 2016,classified as equity instruments,recognized as ownership interest.This verifies the feasibility and validity of the Flow Chart of Perpetual Debt Attribute Judgment.This paper discusses the recognition of perpetual debt accounting with normative research and case analysis.The text constructs the preliminary Framework Chart of Financial Instrument Attribute Judgment and Flow Chart of Perpetual Debt Attribute Judgment,which can clearly sort out the basic process of the perpetual debt accounting recognition,expecting to provide the reference templates for for other new financial instruments.In addition,based on the accounting standards,this paper expounds the accounting treatment of the participators of the perpetual debt,deepening the understanding of the market participants on the accounting standards.We except the research result can contribute to the further development of the perpetual debt business in China,and the accounting standards can be better suited to the increasingly complex financial transactions.