A Study Of Changes In Hedge Accounting Standards And Their Impact

Economic globalization has promoted the globalization of production and sales.Many companies’ production and operations have to experience the circulation of raw materials and finished products worldwide,and face many risks.And hedging activities provide enterprises with an excellent way to manage risks.Therefore,in recent years,non-derivative financial instruments have developed rapidly and financial products have emerged endlessly,meeting the needs of enterprises for financial risk management.But the related accounting treatment has always been the focus and difficulty of the accounting circle.Derivative financial instruments,as speculative instruments,have different goals from hedging accounting.They may cause huge losses for enterprises due to the huge impact of their accounting profits.The purpose of hedging is to manage risks.In order to achieve the purpose of hedging,try to avoid the possibility of companies using derivatives to conduct speculative transactions,which makes the handling of hedging accounting extremely complicated.In order to better promote the development of hedging tools,enterprises have also carried out a series of reforms.IFRS9 was released in 2014,replacing the original IAS39.Under the trend of convergence between China and international accounting standards,China has fully borrowed from IFRS9’s hedging accounting part,and then combined with the actual situation of China’s hedge accounting application,released CAS24 in April 2017.As we all know,behind the formulation of each accounting standard is a game between all parties,and each revision of the standard may bring unexpected effects and results.Hedging accounting has always been the focus and difficulty of the accounting community,not only because of its complexity,but also because of its importance.Hedge accounting is related to the effect of enterprise risk management and has a very important impact on the accounting profit of an enterprise.This revision of the hedging standards has expired for one year.The purpose of this article is to analyze the advantages and disadvantages of the revised standards by starting from the effect and impact of the implementation of the hedge accounting standards by Group A,and to provide a reference for other companies in the form of case analysis..At the beginning of this article,the research situation of hedging standards at home and abroad is described,and then the relevant theories of hedging are introduced,and the concept,classification and reform history of hedging accounting are explained respectively.Then,the changes of the criteria are combed.Then combined with the case of A Copper Group,analyzing the financial situation of A Group after the implementation of the new standard,it was found that the new standard enhanced the operating cash flow of Group A,also increased the group’s operating profit,and enhanced the company’s short-term debt payment ability,Promoted the further development of group risk management.Then it analyzes the positive effect of the implementation of the new standard on Group A,and then analyzes the problems in the implementation of the new standard,including the large number of transactions that still cannot apply the hedging standard,the effectiveness standard is too subjective,and the company has a rebalancing mechanism.The four aspects of the possibility of profit and insufficient disclosure of hedge accounting are explained.Then combined with the problems,the causes of the problems were analyzed,and the causes of the problems were studied from the perspective of A Copper Group and the new standards themselves and the domestic environment.Group A’s own two-way risk exposure makes it have more foreign exchange contracts and commodity futures contracts.The overall risk hedging strategy makes it impossible for companies to include a large number of expected transactions that cannot be included in the standard.The principle orientation of the new standard itself gives managers too much room for judgment.There is no unified method and measurement standard for the method of confirming hedging effectiveness and the"rebalance" mechanism.Coupled with the lack of domestic knowledge and use of hedge accounting,it is easy to produce chaos at the implementation level.Then analyze the insufficient disclosure of hedging accounting information.The lack of accounting talents and the principle orientation of the standards have exacerbated the current lack of hedging information disclosure in China.Lastly,suggestions for the implemeare provided by the standards makers and enterprises.It is hoped that in the revision of the hedging standards,in addition to moving closer to international standards,it is also necessary to integrate China’s current accounting environment and timely revise the implementation guidelines of related standards.At the same time,Group A should also pay more attention to the new standards,launch more diversified hedging methods,and improve the risk management level of the enterprise.It is hoped that it can provide more reference and thinking for other enterprises that use derivatives to hedge.The research in this paper believes that the new hedging standards have broadened the accounting scope of hedging accounting,and the effectiveness standards have changed from quantitative to qualitative.They have also introduced a "rebalance"mechanism and improved the disclosure mechanism.Generally speaking,it has helped companies better.The goal of risk management has also helped Group A to increase profits and increase operating cash flow.However,the new standards will also bring many problems to enterprises,such as reducing the comparability of hedge accounting,creating conditions for corporate fraud,and increasing the difficulty of supervision.At the same time,strict rules on hedging of prospective transactions prevent a large number of transactions from being included in hedging accounting.Although the disclosure of hedging accounting has improved,most companies’disclosure of hedging accounting remains on the surface.