The impact of new accounting standards on financial companies

1. Important changes related to financial enterprises in the new accounting standards

The new accounting standards include accounting and information disclosure for derivative financial instruments, hedging and financial asset transfers. A comprehensive review has been conducted to fill the gaps in my country's accounting standards in these business areas.

(1) Changes in financial assets and liabilities

1. Changes in the classification of financial assets and liabilities: from liquidity to risk. In the current "Accounting System for Financial Enterprises", assets and liabilities are divided based on liquidity. However, with the acceleration of financial innovation and the development of derivatives, the boundaries between long-term and short-term financial instruments have become blurred, so the classification in terms of liquidity cannot truly reflect the essential attributes of assets and liabilities. The new accounting standards mainly emphasize the holding purpose and functionality of assets and liabilities, and their classification standards emphasize their risk;

2. Changes in the measurement of financial assets and liabilities: from historical cost to fair value . The current accounting system stipulates that all bank properties should be measured at actual cost when acquired. The new accounting standards stipulate that when banks initially recognize financial assets or financial liabilities, they should measure them at their fair value, and adopt different measurement methods for different types of assets and liabilities in subsequent measurements. The subsequent measurement of trading assets and liabilities and available-for-sale financial assets adopts fair value. Held-to-maturity investments, loans and receivables and other liabilities are measured at amortized cost using the effective interest method.

(2) Impairment of financial assets changes from expected accrual to objective accrual

The new accounting standards have made major adjustments to the provisions on impairment of financial assets. The main manifestations are: In the following aspects: 1. Changes in the basis for provision. Taking loan losses as an example, the current accounting system stipulates that banks should prepare loan loss provisions in response to losses that are expected to occur. The new accounting standards stipulate that banks should make loan impairment provisions only if they have objective evidence that a loss has occurred on the loan; 2. Changes in the reversal of loss provisions. According to the current accounting system for financial enterprises, if the loan losses that have been written off are later recovered, the written-off loan loss provisions will be reversed. The new accounting standards treat the reversal of loss provisions differently: after the impairment loss is confirmed for financial assets measured at amortized cost and available-for-sale debt instruments, if there is objective evidence that the impairment has been restored, and the objective The above is related to events that occurred after the loss was recognized. The originally recognized loss should be reversed and included in the current profit and loss; impairment losses on available-for-sale equity instrument investments are not quoted in an active market and their fair value cannot be measured reliably. Impairment losses incurred on equity instrument investments shall not be reversed.

(3) Changes in the transfer of financial assets

The transfer of financial assets has always been a difficulty in accounting practice. For this reason, the new accounting standards separately stipulate a "Transfer of Financial Assets" 》. The new standards stipulate that the transfer of financial assets is divided into two categories: overall transfer and partial transfer. If a bank has transferred substantially all risks and rewards of ownership of a financial asset to the transferee, it shall terminate the recognition of the financial asset.

(4) Changes in Hedge Accounting

"Accounting Standards for Business Enterprises No. 24 - Hedging" clearly stipulates hedging accounting. The hedging accounting method refers to the method of including the offset results of the changes in the fair value of the hedging instrument and the hedged item in the current profit and loss during the same accounting period. Hedging is divided into three types: fair value hedging, cash flow hedging and net investment hedging in overseas operations. Different recognition and measurement methods are adopted for different hedging forms.

II. The impact of changes in new accounting standards on financial companies

Financial companies have the characteristics of high debt and high risks. They not only focus on profitability, safety and liquidity, but also pay attention to The adequacy level of capital and the various types of risks that exist. According to traditional accounting treatment methods, due to the uncertainty of derivative financial instruments, it is difficult to recognize them as assets or liabilities, and they are only disclosed in the statement notes as off-balance sheet items. However, the off-balance sheet treatment of derivative financial instruments cannot fully and accurately reflect the risk information of commercial banks.

Since the current transaction volume of derivative financial instruments of domestic financial enterprises is very small, the impact on the total amount of assets and liabilities is also very small. However, as the transaction volume of derivative financial instruments of my country's commercial banks increases, the impact of derivative financial instruments on financial statements cannot be ignored. . Since the new accounting standards are mainly principle-oriented, and fair value measurement, hedge accounting, etc. are very complex, it will have a great impact on the financial accounting of financial companies and the operation and management of financial companies.

1. The impact of fair value. An important change in this revision of accounting standards is that fair value has been widely used. Fair value has been restored as the basic pricing principle for non-monetary asset exchanges and debt restructuring, and the original use of fair value to suppress fictitious profits of listed companies has been Items included in capital reserves are allowed to be included in current profits and losses, which is consistent with the principles of international accounting standards. Fair value is the biggest highlight of the new accounting standards. The new accounting standards adopt fair value in the accounting of financial instruments and measurement of investment real estate. The advantage of this is that it can better reflect the impact of changes in market value on the financial status and operating results of commercial banks. impact, allowing stakeholders to more accurately judge the risks faced by commercial banks. At the same time, fair value is also the biggest difficulty. There will be some problems in implementation: First, because fair value cannot be obtained directly in most cases and needs to be estimated and verified, the use of fair value measurement will increase bank costs and cause cross-bank inconsistency. sexual problems; second, fair value is easily affected by market changes, and my country's market segmentation is very serious, which may lead to unreliable measurement of fair value; third, for non-market financial instruments, valuation techniques are used to determine their fair value Having to rely heavily on the bank's internal models may lead to artificial manipulation of measurement results to a certain extent. The use of fair value weakens the reliability of accounting information because fair value is not based on transactions. At the same time, because in the new accounting standards, assets on the balance sheet can be calculated at fair value or amortized cost, while liabilities are basically calculated at cost, which poses a challenge to the asset-liability ratio management of commercial banks.

2. The dual measurement model may reduce the consistency of accounting information and increase the difficulty of understanding accounting information. According to the relevant provisions of the new accounting standards, financial enterprises can use two methods, historical cost and fair value, to measure different categories of assets and liabilities, thereby basing financial accounting information on the two measurement bases and reducing the consistency of accounting information. It also increases the difficulty of understanding accounting information. Financial Enterprises and New Accounting Standards | Papers and Materials on Financial Research

3. Profit manipulation may occur. The implementation of the new standards, while integrating with international standards and encouraging enterprise development, also brings many negative effects. First of all, the implementation of the new standards will cause profit fluctuations of financial companies in the short term, especially financial companies with a large number of overseas businesses and derivative financial products, such as Bank of China. In addition, due to the increased subjectivity of the new standards in recognition, measurement, and disclosure, accounting information has transitioned from caution to neutrality, leading to the phenomenon of abuse of accounting standards.

4. The requirements for information disclosure are more stringent. The new accounting standards mainly regulate the accounting information disclosure behavior of the banking industry from two aspects: information quality and information content. Information quality standards and information content standards will have a profound impact on the authenticity and transparency of current accounting information disclosures.

5. Professional judgment and operation become more difficult, requiring more accountants to participate in financial enterprises. Professional Judgment The new accounting standards are basically principle-oriented, and many regulations are very complex. A large number of businesses require accountants to make professional judgments. This directly increases the difficulty for financial companies to conduct business accounting accurately and consistently. There may even be different accounting treatments for the same business. Completely opposite extreme situation.

6. It has put forward higher requirements for the risk management of financial enterprises. The new accounting standards recognize and measure derivative financial instruments on the balance sheet, and this recognition and measurement must have sound risk management policies, financial instrument valuation techniques, effective internal control systems, etc., otherwise the on-balance sheet recognition and measurement cannot be achieved. Require. At the same time, hedge accounting requires continuous evaluation of the effectiveness of hedging activities and the provision of written risk management documents for each hedging business.

All of these have put forward higher requirements for financial enterprise risk management.

3. Countermeasures of financial enterprises to the impact of new accounting standards

Currently, my country only implements new accounting standards for financial enterprises that are listed or to be listed. However, with the improvement of the operating level of my country’s banking industry, Improvement, it is possible to implement new accounting standards industry-wide in the future. Therefore, all financial enterprises should have a correct understanding of the impact of the implementation of the new accounting standards and take corresponding measures to adapt to the requirements of the new standards

1. Organize all-round and all-level training to learn the new financial accounting in depth Code and related international standards. Since the implementation of the new standards will have a greater impact on risk management, information systems, and even the entire business management system, training on the new standards cannot be limited to the accounting profession, but must carry out all-round and multi-level training. Training, especially for risk management departments.

2. Improve the corresponding content of the existing accounting system, establish complete risk management policies, financial instrument valuation technology and effective internal control systems, and consider systematic solutions. Many matters required by the new standards, such as the risk control issues of financial derivatives, the acquisition and measurement of fair value, the calculation of asset impairment using future cash flow discounts, etc., all require systematic solutions. According to the article "How Banks Meet the Accounting Requirements of International Accounting Standards" published by the Financial Times on October 19, 2005, through close cooperation with leading international banks, SAP has successfully developed a "financial instrument accounting system" to meet the needs of banks. The need to implement international accounting standards. At present, many domestic banks are already using the company's system. We can consider learning from advanced foreign practices to lay the foundation for designing a system suitable for our country's financial enterprises.

3. Actively carry out peer exchanges. At present, there are precedents for domestic financial enterprises to fully implement international accounting standards. Bank of Communications, China Construction Bank, and Bank of China have been listed in Hong Kong. For other financial companies, they should actively carry out peer exchanges to learn about the arrangements and steps for the full implementation of international accounting standards by pioneers in the industry, as well as their experiences and practices in implementing financial instrument accounting standards, so as to improve the entire industry's understanding and understanding of the new standards. execution ability.

4. Improve the organizational structure and recruit high-level professional talents. At present, the organizational structure of many financial enterprises is becoming flat. According to the development scale of derivative financial instruments, corresponding internal departments should be established in a timely manner and equipped with specialized personnel to manage financial instruments, especially derivative financial instruments; at the same time, the construction of internal control systems should be strengthened to avoid single-handedly Human operators are used to prevent decision-making errors and achieve specialized risk asset management. Financial companies should recruit financial talents who can accurately grasp market conditions, have a keen awareness of risks, and have a deep understanding of the determination standards for determining fair value and provision for impairment of financial assets. In addition, communication and coordination with regulatory authorities, financial departments and tax authorities should be strengthened to create good external conditions for financial companies to operate prudently.

The convergence of accounting standards in the financial industry with international practices is an irreversible trend. This time, the construction of my country's new accounting standards system has taken a key step in the internationalization of accounting standards, providing a golden opportunity for my country's financial industry as a whole to achieve convergence with international accounting practices. Financial enterprises should attach great importance to the opportunities and challenges that may be brought about by the implementation of the new accounting standards, carefully consider, fully prepare, and smoothly complete the transition to the new accounting standards, and strive to apply the essence of the new accounting standards into the accounting practices of their units, and fully Give full play to their role in promoting the unit's improvement of corporate governance and the coordinated development of quality, efficiency and scale.