A Study on the Disclosure of Derivative-Instrument Transactions of the Banking Industry and the Accounting Treatment of the Interest Rate Swap Contracts

• Main Authors: Huang, Pei-En, 黃培恩
• Other Authors: Tsai, Yann-Ching
• Format: Others
• Language: zh-TW
• Published: 1998
• Online Access: http://ndltd.ncl.edu.tw/handle/71612815074215245528

碩士 === 國立臺灣大學 === 會計學系 === 86 === In the recent years, rocket scientists continued innovating derivative instruments to meet practical needs for investment and finance. At the same time, the use of derivative instruments caused some terrible financial events. Investors, creditors, auditors and government administrators were so concerned about such events that FASB issued three statements of financial accounting standard to regulate the disclosure of the information concerning derivative instruments traded. They hoped that the information based on these statements would faithfully reveal the economical substance of the related transactions and events. Therefore, the investors could successfully avoid the reoccurrence of unfortunate financial events. Before the issuance of the related domestic statements of financial accounting standard, the Securities and Futures Exchange Committee issued two executive regulations to order that the public corporations should periodically announce and disclose the information regarding derivatives. The study first collects the information of derivative instruments traded and then discusses the adequacy of the two administrative regulations. Furthermore, since recognizing the related assets or liabilities should be the best method to represent derivative instruments, the study accords to the requirements of SFAS NO.13X--"Accounting for Derivative Instruments and for Hedging Activities" and simulates some examples to explain the accounting processes of the interest swap contracts. These simulations could also serve as implementation guide for future accounting requirements. The study finds that there are some weaknesses regarding the disclosure of the information of derivative instruments operated. In the aspect of newspaper announcement, domestic banking industry obeyed the requirement of the Regulation No. 01165. The most important weakness is that the regulation doesn't require the banking industry announce the information according to different purposes. This conflicts with the requirement of the Regulation No. 00263. Besides, the regulation does not demand for information about fair value, hedged items and the hedged amounts. In the aspect of disclosure on financial reports, the information seems disparate, and some definitions and scopes of notions are not clear. The study considers that the two regulations would not be of great use to investors. In the aspect of the accounting treatment of the interest swap contracts, the study agree with the FASB that the interest rate swap contracts should be recognized in the statement of financial position and be measured at fair value. If the reporting entities designate the swap contracts as fair value hedges, the gain or loss shall be recognized in earnings in the period of change. For contracts designed as cash flow hedges, the gain or loss shall be reported as a component of other comprehensive income and recognized in earnings in the same period when the forecasted transactions affects earnings.