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The Study on the Problems of Debt Restructuring Standards in China

Author: TianXia
Tutor: DongLiWei
School: Capital University of Economics
Course: Accounting
Keywords: Debt Restructuring Criterion Issues
CLC: F233
Type: Master's thesis
Year: 2006
Downloads: 2607
Quote: 5
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Abstract

Review of accounting standards development process, difficult to find, for each formulation of accounting standards are arising in the context of a specific event. Enterprises due to mismanagement or subjected to external factors led to cash flow problems, the decline in profitability, insolvency, debt distress, leading to restructuring activities continue to occur, and thus contributed to the generation of debt restructuring guidelines. 1998 debt restructuring guidelines first enacted, for the specification of the debt restructuring transactions, to protect the interests of creditors has played a positive role. 2001 Guidelines for the 1998 guidelines were revised, it is our government based on market specific environmental characteristics as well as debt restructuring problems in practice to make a breakthrough initiatives. 2001 Guidelines to some extent prevent the use of guidelines for listed companies profit manipulation and earnings management. 2006 amendments, the purpose is to try to establish a line with China's actual situation, and be able to guide the behavior of restructuring transactions with international standards of accounting practice guidelines. Development of market economy, needs and constraints related to specific regulations. 2006 debt restructuring guidelines over 2001 new standards has undergone great changes in the guidelines developed in 1998 is basically the same. New guidelines to use fair value measurement methods, the use of present value estimation techniques, and the resulting gain on debt restructuring profit or loss. These are related to the current international standards of practice match. The new guidelines bring new vitality. How to do the convergence of old and new standards and alternately, how reasonable and reliable use of new standards, become the norm after the enactment of focus. 2006 new guidelines advocate the use of fair value. The existence of an active market the fair value of the acquired prerequisite. Debt restructuring matters involving both the fair value of assets, and the fair value of liabilities involved. In the present, China is not perfect, active market, the fair value of the acquisition to be more reliance on estimation techniques, using future cash flows are discounted to their present value approach. Traditional methods do not consider the present value of the risk factors, the paper solve this problem, carried out on the improvement of risk factors into account, the cash flows to be adjusted, or the discount rate to be adjusted. Mature in the market conditions, the fair value can be formed automatically through the market, price is the fair value of the asset or liability. In addition, the fair value of the acquisition debt, consider credit status of enterprises, enterprises with lower credit discount rate is high, the same cash flows are discounted to present value is lower, it will have a \In China, credit status rating system did not form, so there are certain difficulties to obtain debt assessment. At present, China should strengthen the credit rating system construction, so that their credit status is reflected in the discount rate, the reduction of the debt restructuring transactions of assets and liabilities assessed risk factors; should strive to build an active market, bringing the market's automatic effect, so that the fair value fair access to the real.

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