The Impact Of The New Accounting Standards For Financial Instruments On The Insurance Listed Company

In order to achieve the continuous and comprehensive convergence of China’s accounting standards and international financial reporting standards,the Ministry of Finance revised and issued financial instruments accounting standards in March 2017,including No.22-recognition and measurement of financial instruments,No.23-transfer of financial assets,and No.24-hedge accounting.It required that the enterprises listed both in mainland stock exchanges and overseas stock exchanges shall implement these new Accounting Standards for Financial Instruments from 2018.The new accounting standards have made adjustments mainly in the classification of financial assets as well as the impairment of financial assets,and the category of available for sale financial assets has the most significant change.The insurance industry holds a high proportion of available for sale financial assets,and as a result,it has become the financial sector most affected by the revision of the standard.Up to now,only one A+ H-share listed company-Ping An Insurance has implemented the new financial instrument standards,and the other four companies,including New China life insurance,China Pacific Insurance,China Life Insurance and PICC,have chosen to suspend the implementation.In order to explore what impact the implementation of the new financial instruments standard will have on the insurance listed company,and why do so many listed companies in insurance choose to delay the implementation of the new financial instruments standards,this paper takes Ping An Insurance,the only one to implement the new guidelines,as a case study object,and uses the event study method to preliminarily test the market reaction and investor attitude of accounting policy change.On this basis,combining with the reclassification and impairment of financial assets of Ping An insurance on the switching date and after the implementation of the standards,this paper analyzes the impact of the implementation of the new financial instrument standards on its business performance from the perspective of reclassification of financial assets and application of expected loss model;Secondly,according to the requirements of China Risk Oriented Solvency System,we study the impact of the new standards on the solvency of the company;Finally,focusing on the changes of investment portfolio before and after the implementation of the standards,we discuss the changes of investment strategies adopted by Ping An in response to the impact of the new standards.This paper finds that although the implementation of the new financial instrument standards has played a positive role in improving the quality of accounting information and strengthening financial supervision,the change of accounting policy has still caused some negative effects on listed companies in insurance,and the implementation of the new financial instrument standard has brought significant negative fluctuations in the company’s operating performance,solvency and investment effect.And it is why so many listed companies in insurance are not willing to implement the new financial instrument standards.In addition,there are many challenges and high cost in the implementation of the new standards,and as a result,many listed companies choose to suspend the implementation of the new standards.On this basis,this paper puts forward many challenges and corresponding countermeasures in the implementation of the new standards.Currently,there is little literature studying the impact of the implementation of the new financial instrument standards on the insurance listed company.This paper is a useful supplement to the study of financial instrument standards.Besides,this paper carries on the study from multi-perspectives including business performance,solvency and investment strategy.On the one hand,it helps investors to reevaluate the performance of listed companies and provides a reference for them to make rational investment decisions;On the other hand,it helps the listed companies to adjust their management and investment strategies to prevent and resolve financial risks in time,and it has some reference values for the insurance listed companies that are about to implement the new financial instrument standards,which will accelerate the implementation of the new financial instrument standards.