The Impact of SFAS No. 34 and No. 36 on Risk Management Practices of End Users of Derivatives

• Main Authors: Lisa Kuang, 關春修
• Other Authors: Chung-Fern Wu
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/15139188181988137376

碩士 === 國立臺灣大學 === 會計與管理決策組 === 95 === After the Second World War, along with the rise of the floating exchange rate, the import/export merchants suffered substantially from the fluctuation of the exchange rate and interest rate. In order to overcome the risk of pricing and effectively take control of the risk, the financial market gradually developed financial derivatives in response to the vast demand, thus providing a path to reduce this risk. However, the advent of numerous new creative financial products quickly surpassed the speed of revision of the related laws and accounting systems in each country. As a result, after year 1990, there have been consecutive events where the well known financial institute or industry suffered substantial loss as a result of using the derivative financial products. Furthermore, this also led to serious loss for the industry and investment individuals. Under this circumstance, the historical cost principle from the traditional accounting system in the past could no longer meet the demands of related information with the need for financial products in the capital market. As a result, the accounting standardization in US and international countries started to set the norms for handling the accounting practice. In Taiwan, according to the statistical data from the central bank, the derivative financial products grew five times during the eight years between 1998 and 2006. This growth rate was astonishing. With the popularity of the transaction of the derivative financial products, the enterprise management may be able to cover up some improper behaviors due to the inadequate expression of these derivative financial products. To prevent the inadequate accounting treatment for the derivative financial products and to avoid the cover up of large amounts of accounting loss, the ROC Accounting Research and Development Foundation announced Statements of Financial Accounting Standards No. 34, “Financial Instruments: Recognition and Measurement,” and No. 36, “Financial Instruments: Disclosure and Presentation” in 2003 and 2005, respectively. These new accounting rules were effective in 2006. These accounting rules are based on the experience and reference to the International Accounting Standards No. 39. These two accounting standards will record impact on the enterprise in our country. All holders and issuers of the financial product industry are regulated by these norms except a few that do not fit these regulations. In order to have a deeper understanding of the impact of these two accounting standards on the domestic enterprise, this essay makes reference to the content of the questionnaires from the US Association for Financial Professionals on the status before and after the implementation of FAS133. We based the samples on the research and study of domestic public companies and the content of the questionnaires according to the real domestic situations in order to understand the situation of its execution. Furthermore, we can compare the differences in this application in Taiwan and the US. There are five chapters: Chapter 1: Introduction. This includes the background, motivation, and purpose of this research. Chapter 2: Document Research. Describe the definition and origin of the derivative financial products. The risk associated with the use of the derivative financial products, the irregularity in applying these financial products inside and outside of Taiwan, the accounting and financial reform in response to the irregularity from these products. Express the content of the announcements of SFAS No. 34 and No. 36 and use a table to compare the differences before and after the application of these two rules. Chapter 3: Research and Design Method. Introduce the contents of the questionnaire, the concept and logic behind design of the questionnaire, and explain the questionnaire samples. Chapter 4: Discovery and Analysis from the Results of the Questionnaires. Mainly based on the results of the questionnaires collected, analyze the domestic enterprise. Chapter 5: Conclusion and Suggestions. Search for a conclusion based on the results of the above analysis, and propose suggestions. Based on discoveries through the questionnaires, we came to the following conclusions: