2002 Fiscal Year Final Research Report Summary
International comparison of the theory of hedge accounting and a survey of the practice
| Project/Area Number |
12630160
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Accounting
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| Research Institution | KINKI UNIVERSITY |
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Principal Investigator |
URASAKI Naohiro Kinki University, School of Business and Economics, Professor, 商経学部, 教授 (60203600)
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| Project Period (FY) |
2000 – 2002
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| Keywords | Deregulation of global market / Risk management / Derivatives / Mark to market accounting / Hedge accounting / Fair value / Comprehensive income / Brand evaluation |
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| Research Abstract |
Purposes of this research are described as (1) to review the theories underpinning the accounting standards for hedging activities in selected countries, (2) to unveil the current practice of hedge accounting in Japan, and (3) to recommend proposals to improve accounting framework in an era of global economy.
Research results of the above subjects were published as Fair Value Accounting. This book is divided into five parts; (1) Background of fair value accounting, (2) Recognition in fair value accounting, (3) Measurement in fair value accounting, (4) Reporting of the business performance, and (5) Survey of risk management and current state of fair value accounting. In the part of background of fair value accounting, necessity of the accounting is discussed and theoretical basic structure is demonstrated by an analysis of financial assets and liabilities held by listed Japanese firms. The first part of this book forms a basis to apply fair value accounting to a business practice.
In the
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part for recognition and measurement problems, recognition criteria for leasing and financial instruments are considered to have balance sheet include those transactions. Four criteria as definition, measurement, relevance, reliability are required to meet for recognition of newly emerged financial activities in 1990s. It is a theoretical contribution that probability concept should be applied to financial derivatives through the weighted probability approach. For measurement issues, measurement attribute as fair value is the most appropriate one for measuring substance of financial instruments and comprehensive income. Fair value would communicate useful information concerning results of hedging activities and risk management to investors. Capital maintenance concept as current-market-rate-of-retura for financial instruments is also discussed. Comprehensive income reflects all financial performance of the business at the end of a fiscal year.
Accounting framework indicated above will be the same effective scheme as accounting for impairments of long-lived assets and evaluation of brand assets. Future research subject is to improve the framework of fair value accounting and discuss general applicability of that framework to non-financial assets and intangible assets. Those constitute a big challenge for traditional cost-based accounting framework. Less
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