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On fair value accounting of commercial bank risk management of international experience

Author: ZhangXiaoTao From: www.yourpaper.net Posted: 2010-06-12 03:18:15 Read:
Keywords: the fair value     risk management; reliability; financial instruments classification
Abstract: this paper analysis and summarizes the developed countries the introduction of fair value accounting of commercial bank accounting information relevance and reliability, and analyze the impact of the new financial instruments classification methods on the risk management strategies of banks; points out that in the face of the Chinese market condition and particular attention should be paid to the reliability problem of fair value, and classification of financial the tools will cause the fluctuation of regulatory capital, and then change the risk management behavior of banks.
Changes in the new "accounting standards for business enterprises" is the largest comprehensive introduction of the fair value measurement attribute.The new guidelines require financial derivatives are measured at fair value, and from the table and moved to the table to reflect.This will be for banks using the derivative financial instruments for risk management behavior influence.Many researchers at home and abroad were introduced to these questions.But because the Chinese banks are small in number, more difficult to obtain relevant data, coupled with the new standards introduced for a short period of time, the quantitative analysis is difficult.This paper analyzes the application of fair value accounting with foreign countries, the United States accounting standards board (FASB) standards and the international accounting standards SFASI15, IAS39, analysis of the introduction of fair value accounting and market relevance and reliability. And the influence of financial instruments and measurement to confirm the classification of commercial bank risk management, in order to provide reference on the risk management of China's commercial banks in the new accounting standards.
, the fair value impact on bank accounting information relevance and reliability of
With the criterion of SFASI15 release. Analyzed many scholars to study the relevance of the fair value.Because fair value reflects the estimates of the present value of future cash flow in consideration of market interest rate and risk factors, so the fair value measurement also has beneficial effects on Evaluation of securities investment activities of enterprises.In order to enhance the relevance of accounting information in decision-making.This kind of change and China's current change is consistent, our original implementation of the "accounting system for business enterprises" by requiring financial assets provision for preparations to confirm the value of financial assets decreased, but not confirmed the increase in the value of financial assets, reflects the requirements of conservatism.And the new accounting standards on the trading financial assets, liabilities and financial assets available for sale by the subsequent measurement of the fair value, not only confirmed the unrealized loss, also confirmed the unrealized gains; unrealized also stipulates that the two kinds of financial instruments, profits and losses are recognised in profit or loss of rights and interests, improve the relevance of accounting information the.
Barth, Beaver and Wolfson (1990) the bank stock returns can be divided into two parts of EBSGL (EarningsBeforeSecuritiesGainsandLosses), SGL (RealizedSecuritiesGainsandLosses), explain the price of bank shares structure results support EBSGL than SGL earnings components more complete.Investors are advised to use EBSGL returns ingredients to observation value.Bartheta1. (1990) SGL are much lower than the expected EBSGL (May to zero), because the SGL yield component reflects the amortized historical cost measurement of the value of securities (not implemented) lag and securities sold to realize the fair market value of the time.In other words, financial instruments and financial instruments are sold only in was reported in the income statement, and thus delayed confirmation change between the amortized cost and market value.That is to say, if the securities have not sold during the fall at amortized cost value, then SGL returns ingredients will bring error, SGL explanation ability reduces.Barth (1994) of the study also shows that, EBSGL provides the market more and more reliable information than SGL.
Barth, Landsman, and Wahlen (1995) to 137 American banks in the financial reporting data from 1971 to 199O as a sample inspection found, first of all, the securities investment income can be used to the fair value measurement is based on the historical cost of bank earnings earnings more volatile.But the volatility of returns this increase does not necessarily reflect bank economic risk (such as bank stock price reaction increased risk).Secondly, if the sample period using the fair value information of investment securities to determine the bank regulatory capital, compared with the historical cost, banks will be more frequent violations of regulatory capital requirements.Despite what happened in under the fair value accounting violations are more helpful in predicting future violations of regulatory capital, but the potential associated with an increase in fair value accounting regulatory risk is not reflected in the bank's share price.Changes in interest rates caused by changes in the fair value of securities investment income multiplier on interest income reflected in bank shares, indicating that the market interest rate volatility is related to the valuation of equity.
Nelson (1996) the fair value information disclosed by the 200 largest commercial banks in the United States from 1992 to 1993 as the sample, to test the correlation between bank equity and press SFAS107 required disclosure of fair value information, found that only securities investment fair value has the value relevance, differences and loans, deposits, long-term debt and off-balance sheet financial instruments fair value and book value does not have value relevance.It can also provide evidence in support of fair value accounting in part for the implementation of new accounting standards in china.
Barth, BeaverandLandsman (1996) to 136 American banks related data from 1992 to 1993 as the sample, examines the value relevance of fair value information disclosure requirements in the SFAS107, found that the fair value of securities investment, loans and long-term debt are estimated to have value relevance: but the banks take in deposits and fair value information outside the project does not have value relevance.
Through the above research can be found at fair value accounting in general than the historical cost more to reflect economic reality, fair value information compared with the historical cost information increases the information content more, fair value information has more value relevance.But the commercial bank balance sheets including almost all the financial instruments. The report yield means the benefit measurement methods of SFAS115 standards of the excluded banks operate is the key influence factors.
Beatty, ChambedainandMagliolo (1996) to 195 Listed Bank of America and 94 listed insurance company related data from 199O to 1993 for samples. Check the SFAS115 caused the unrealized gains and losses in securities investment from disclosure to confirm the change, they assumed that the stock price reaction will reveal the change.The results show that the SFAS115 caused from disclosure to confirm changes for bank regulators is very important, and to other stakeholders are not important point.Secondly, they also found that, for those that may increase the possibility of measured at fair value and investment securities in the match the duration of the liabilities of the event, banks showed a positive market reaction, thus supporting the banks and their regulators "mix about fair value accounting (PartialFairValueAccounting) will reduce the bank's equity accuracy.".In addition, the results also show that more frequent transactions, securities investment, investment in the longer term, the market interest rate hedging more fully the bank by the standards, the negative impact of the deeper.
From the empirical results, although their results have not been entirely consistent results, however, most empirical evidence indicates: fair value information disclosure of securities investment have information content: loans, long-term liabilities and off-balance sheet financial instruments disclosure of fair value information financial tool does not have value relevance.Most scholars regard the reliability problems attributed to its fair value estimation (Nissin, 2003): when using the market transaction price as the foundation of the fair value, its reliability is high, thus the fair value information has the value relevance of financial instruments; and when there is no active trading market, rely on the fair value information valuation model and the hypotheses of the estimated does not have information content for investors.Therefore, the key of success or failure of fair value accounting model is the reliability of fair value estimates.
two, financial instruments classification and its impact on the commercial bank risk management
After the implementation of new accounting standards.Commercial banks should be according to the intention of holding financial assets into tradable financial assets, the held-to-maturity investment, loans and receivables, available-for-sale financial assets four; the financial liabilities divided into trading and financial liabilities other financial liabilities two.This section refers to the United States of America Financial Accounting Committee
For the classification of financial assets and liabilities are comparative analysis.In order to illustrate this new classification effect on bank risk management.
American Financial Accounting Standards Board (FASB) in SFAS115 will all bonds investment and can determine the fair value of the equity securities investment by enterprises the intention of holding classified as held-to-maturity securities trading, securities and available-for-sale securities and other 3 categories, the introduction of fair value measurement; subsequent measurement, for various types of securities unrealized holding gain loss and impairment to take a different approach.Asset classification method of SFAS115 oriented to intention can reveal the important influence on the supervision of foreign banks to implement these standards. So based on our new accounting standards may impact on the risk management of commercial bank to speculate.
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