Accounting Theory of Financial Instruments and Drawing Up Vietnam Financial Instruments Accounting Standard.pdf

1、The derivative instruments accounting plays an important role in the development of the financial market and the management process of financial risks because of the close relationship between the methods of derivative i

2、nstruments accounting and the hedging activities in commodity market and financial markets.Moreover, it brings the relevance and reliability of financial statements.Applying derivative instruments accounting is an essent

3、ial factor for the development of financial market and economy.Currently, Vietnamese accounting is using historical cost methods for the financial assets, the fair value is not applied by the enterprises.How is the effec

4、t of using derivative instruments accounting and hedging activities for financial risks? If the enterprises apply derivative instruments accounting and hedging activities, how will they get benefits? The Thesis analyzes

5、and emphasizes using the method of derivative instruments accounting, fair value evaluation and financial analysis to find out affecting factors to help managers and investors well manage financial risks.Besides, the The

6、sis also guides detail of the accounting recognition method and make derivative instruments financial statements.As also published by the Vietnamese Chamber of Commerce and Industry (VCCI) and the World Bank (WB), in 201

7、1 Vietnam had 622,977 entities in which 79,014 entities were bankrupted.This problem is concerned with financial risks or not and why? Thus, the Thesis reviews the use of derivative financial instruments for financial he

8、dge and their effects to minimize the financial risks of the entities and bankrupt entities as well as their impacts on financial markets through decisions of investors and managers because their decisions are based on a

9、nalysis results of financial statements.A country's accounting policy has not applied the derivative financial instruments for financial hedging, leading to affect that country's economy or not? Especially, the financial

10、 markets of Vietnam or countries with similar economies have not also applied the hedge accounting to their hedging activities.The Thesis uses the accounting theories of international accounting standards and Generally A

11、ccepted Accounting Principles in the United States and applies the methods of data analysis in the financial statements to show the results of hedge accounting that are concerned with bankruptcy, financial risks and econ

12、omy decline.Moreover, hedging activities are necessary for the entities and investors.Even though the entities and investors do not expect the risks, the risks are still always present in all investment decisions or tran

13、sactions of the entities, investors, and these risks can transform their dreams from "sweet dreams" to "bitter consequence".Depending on the risk level can cause financial losses, or it makes the entities in the exhauste

14、d financial state and even bankrupt.Therefore, the entities or investors need to consider hedging activities in order to minimize the damage caused by the risks for the entities and investors.Many financial institutions

15、and entities have used the derivative financial instruments to hedge exposure to different risks (e.g.Interest rate risk, foreign exchange risk, commodity risk,etc....).As we see, the historical cost is determined the in

16、itial value of investment securities and recognition in accounting books, after that value of the securities will be varied according to the market price.Therefore, the historical cost of the securities will be unreasona

17、ble in the future.So the firms need to apply fair value method for their value revaluation.In addition, using the fair value method to measure financial assets will help managers, investors avoid financial risks.The IASB

18、'S researches show that the economic crisis is affected by financial risks.Specifically, in 2008 the economic crisis started from the economy of the U.S.and then it spread out the global economy.This economic crisis was

19、due to bad debt credits and frozen properties investment.Besides, the accounting method is also an important factor and has impact on the relevance and reliability of Financial Statements.If the accountants apply inexact

20、 accounting method, it will lead to inexact financial information in Financial Statements.So the International Accounting Standard Board (IASB) has issued international accounting standards (IAS), such as IAS 32 (Financi

21、al Instruments: Presentation); IAS 39 (Financial Instruments: Recognition and Measurement); international financial reporting standard (IFRS 7-Financial Instruments: Disclosures) and international financial reporting sta

22、ndard (IFRS 9-Financial Instruments) for finns' application.From the above reasons, the author considers the relevance and reliability of Vietnam's current Financial Statements and finds out that when the firms apply the

23、 inexact accounting method to evaluate the financial assets, their financial statements will be irrelevant and unreliable.In fact, almost foreign investors and domestic investors don't dare to make more investment on Vie

24、tnam stock market.They doubt about the relevance and reliability of Financial Statements.Because, they cannot understand accounting method that the firms have applied to make financial statements.So, they cannot identify

25、 that the accounting data in financial statements are exact or inexact.Although the financial statements were audited by auditors, auditor's audit statements are the only reference for the Investors.So they can get risk

26、of financial information.Why? This problem needs to discuss, and find out unreasonable financial information or reasonable financial information on Financial Statements.In 2000 the stock market of Vietnam officially went