Risk strategic management paper 1 Discussion on foreign exchange risk management strategy of enterprises
With the deepening of China's financial system reform and the improvement of economic marketization, a more flexible and elastic exchange rate system will be gradually formed, the operating efficiency of foreign trade will be further improved, and the foreign exchange risks faced by enterprises will also increase. The increase of foreign exchange risk will inevitably affect the profit income of enterprises. How to deal with financial statements, how to reflect foreign exchange risks and how to use financial derivatives reasonably in foreign exchange business is a problem worthy of close attention. Through the analysis of this problem, it is expected to provide some reference for enterprises to deal with foreign exchange risks.
Keywords: foreign exchange risk; Derivative financial instruments; Accounting confirmation; Measurement; way
China Library Classification Number: F82 Document Identification Number: A Document Number:1672-3198 (2008) 09-0245-02.
1 Overview of foreign exchange risks
1. 1 Definition of foreign exchange risk
There are broad and narrow foreign exchange risks. Foreign exchange risk in a broad sense refers to the economic losses or gains that may be brought to foreign exchange traders due to changes in exchange rates and interest rates, as well as the default of traders and the implementation of foreign exchange control by foreign governments, including credit risk, settlement risk, national risk, trader fraud risk, liquidity risk and exchange rate risk arising from all economic activities denominated in foreign currencies. In a narrow sense, foreign exchange risk refers to the loss or unexpected gain of income and expenditure, assets and liabilities adjusted in foreign currency due to exchange rate changes in international economic, trade and financial activities, also known as exchange rate risk.
1.2 foreign exchange risk types
From different angles, there are mainly two kinds of foreign exchange risks: from the accounting point of view, foreign exchange risks mainly refer to the impact of exchange rate changes on the balance sheet of enterprises, based on book value, which mainly reflects the actual losses caused by exchange rate fluctuations and the book losses in accounting treatment; From the point of view of financial scholars, foreign exchange risk mainly refers to the impact of exchange rate changes on enterprise value caused by enterprise cash flow. Based on the market value, it reflects the actual loss caused by the current exchange rate to the cash flow of enterprises, and estimates the expected loss that may be caused by the impact on the cash flow of enterprises in the future.
2 the basic principles of accounting treatment of foreign exchange risk
2. 1 principle of legality
In order to safeguard the interests of the country and people, protect the legitimate rights and interests of investors and ensure the authenticity of accounting treatment of foreign exchange risks, we must conscientiously implement national rules and regulations on the basis of national laws, regulations and related systems in this regard, and must not artificially adjust and change the legitimacy of foreign exchange risk recognition, measurement and disclosure.
2.2 the principle of timeliness
Because the exchange rate is constantly changing, the timeliness of foreign exchange risk confirmation and measurement is very important. Therefore, in order to ensure the correctness and reliability of foreign exchange risk recognition and measurement, and to transmit the accounting information as soon as possible at the appropriate time when the risk occurs, it is necessary to confirm and measure the foreign currency business in time according to the relevant documents, and there should be no artificial delay and backlog, so as not to affect the correct decision-making of enterprises.
2.3 the principle of authenticity
Ensuring the authenticity of accounting information is a necessary prerequisite for accountants to provide reliable information. Only by adhering to the principle of authenticity, objectively and fairly reflecting the actual occurrence of foreign exchange risks, and striving to put an end to artificial adjustment and concealment, can the objectivity and fairness of relevant accounting information provided by foreign exchange business accountants be guaranteed.
2.4 the principle of prudence
Foreign exchange risk is affected by exchange rate fluctuations, and accounting confirms that accounts are not reconciled every day. Moreover, foreign exchange risk is the product of exchange rate changes during the whole period, and it is impossible to adjust it day by day. Therefore, when accounting for foreign exchange risks, we should follow the principle of prudence, predict possible losses in advance and take appropriate measures to deal with them, while possible gains should generally be confirmed on the day of realization.
2.5 the actual cost principle
In the confirmation and measurement of foreign exchange risk, the first problem is what exchange rate is the standard for confirmation. From the perspective of authenticity, our confirmation of the actual foreign exchange risk should be based on the current exchange rate, because it reflects the current actual monetary cost; The realized foreign exchange risk should be based on the foreign currency difference caused by the exchange rate change when it actually occurs; For unrealized foreign exchange risk, the amount of foreign exchange risk should be determined by the actual cost adjusted according to the current exchange rate.
3 accounting recognition of foreign exchange risk
The confirmation of foreign exchange risk refers to the process that accountants use certain standards and methods to distinguish economic businesses involving foreign exchange risk, determine whether they should be recorded and accounted for as accounting objects, and determine how to further process them into accounting reports.
3. 1 General method of accounting confirmation of foreign exchange risk
At present, there are two theoretical views on accounting recognition of foreign exchange risk at home and abroad:? Business point of view? And then what? Two business views? . The former view holds that there is no need to separately confirm foreign exchange risk in accounting, and the appreciation or depreciation of foreign currency caused by foreign exchange risk and the difference converted into functional currency do not need to be dealt with separately, just add or subtract the original business amount; The latter view holds that foreign exchange risk is an aspect of an enterprise's financial activities except independent settlement of creditor's rights and debts, and its gains and losses should be confirmed separately, and a special account should be set up for accounting treatment.
Because? Business point of view? Tracing back to the source, the procedure is more troublesome. Two business views? The confirmation of foreign exchange risk is intuitive and clear, the procedure is simple, and it can also reflect the performance of enterprises in financial activities, so the latter is widely used in the world at present. At present, China stipulates that joint-stock companies and other enterprises with foreign exchange business adopt foreign exchange risk in accounting. Two business views? Make accounting confirmation.
3.2 Accounting Recognition of Derivative Financial Instruments
IAS39 clearly stipulates that the standard of initial recognition is that when an enterprise becomes a party to the contract terms of derivative financial instruments, it shall recognize derivative financial assets or derivative financial liabilities on the balance sheet. For example, forward contracts should be recognized as financial assets and related liabilities on the commitment date, rather than waiting until the actual delivery date. Similarly, when an enterprise becomes a buyer or seller of financial options, it should immediately recognize the options as assets and liabilities.
ISA39 also stipulates that when the enterprise is no longer? Control? When the derivative financial assets are transferred, the corresponding transfer transaction should be accounted as a project. Sales transaction? ; On the contrary, it should be counted as one item? Financing transaction? . In recent years, the rapid growth of asset securitization transactions and other financial innovations in the international financial market has further complicated this problem, while the guide provided by ISA39 is relatively simple, which cannot fully meet the market demand and needs to be further enriched.
4 accounting measurement of foreign exchange risk
4. 1 accounting measurement method of foreign exchange risk
4. 1. 1 single exchange rate method
The single exchange rate method refers to all items (except share capital) in foreign currency accounting statements, which are generally converted into a specific currency by using a unified and single current exchange rate. Under this method, the equity items of subsidiaries are still converted according to the historical exchange rate when the invested capital is actually received. This method makes the conversion simple and easy, and can maintain the original structural proportional relationship of foreign currency accounting statements of subsidiaries. However, when the exchange rate changes greatly, this method reflects that the amount of statements converted by subsidiaries will be quite different from the actual value. Among the countries that adopt the current exchange rate method, some advocate using the average exchange rate, while others advocate using the current exchange rate for profit items, and no consensus has yet been reached.
4. 1.2 Multi-exchange rate method
Multi-exchange rate method refers to the method of converting related items in foreign currency accounting statements by using various exchange rates such as current exchange rate, historical exchange rate and average exchange rate according to different report items. Generally speaking, there are three basic methods:
(1) The current and non-current method refers to the method of converting items in the balance sheet into foreign currency statements at different exchange rates according to liquidity and non-liquidity. For the profit and loss items in the income statement, except for depreciation and amortization expenses, which are converted according to the historical exchange rate when the relevant assets are recorded, other income and expenses can be converted according to the average exchange rate of the whole accounting reporting period under the assumption of balanced occurrence. This conversion method is conducive to the analysis and evaluation of the company's working capital. However, there is no sufficient theoretical basis for artificially stipulating that liquid and non-liquid items adopt different conversion exchange rates.
(2) Monetary and non-monetary method refers to the method of converting the items in the balance sheet into foreign currency statements according to the different exchange rates of currency and non-currency. This conversion method uses the current exchange rate to convert currency items. This conversion is reasonable because the value of monetary items changes with the change of market exchange rate. However, the Monetary Law does not fully explain why it is classified in this way, nor does it really solve the substantive problem of foreign currency statement translation. In practice, the laws of liquidity and illiquidity are often combined with the laws of currency and non-currency.
(3) Time method refers to the method of converting all items in the balance sheet measured at the current or future exchange rate according to the exchange rate at the end of the reporting date. For the profit and loss items in the income statement, the income and expenses shall be converted according to the actual exchange rate at the time of transaction, but the income and expenses that occur frequently, massively and averagely, like other items, shall be converted according to the average exchange rate of the whole accounting reporting period. For inventory, if it is measured and reflected according to the current purchase and sale price, it will be converted according to the current exchange rate; If the inventory is priced at historical cost, it shall be converted at the historical exchange rate at the time of occurrence. Theoretically speaking, the temporal method requires that every transaction should be converted at the corresponding exchange rate when it occurs, which makes the processing result more correct, but it is difficult to do it in practice. Therefore, for some projects, the simple average exchange rate or weighted average exchange rate in a certain period is used as a more reasonable approximate substitute value for conversion.
4. 1.3 Comparison of translation methods of foreign currency statements
See the following table for the comparison of the conversion exchange rates of the four foreign currency statement conversion methods:
4.2 Accounting measurement of derivative financial instruments
Derivative financial instruments are initially recognized as financial assets and financial liabilities when a contract is signed. At this time, only the corresponding rights and obligations are generated, and the transaction of the basic bill has not yet occurred. The object of measurement should be the value of the contract, not the value of the basic instrument. Because fair value can reflect people's expectations of future transactions and remind people of the risks and benefits that derivative products may bring, it is obviously superior to historical cost, so it is an inevitable development trend to replace historical cost with fair value. However, not all derivative financial instruments can be traded on the same day in an efficient market, so it is difficult to get an objective fair value of these derivative financial instruments.
The measurement of derivative financial instruments is divided into two parts: the initial measurement when the derivative financial instruments are initially recognized and the subsequent measurement on the preparation date of financial statements at the end of the accounting period. When the derivative financial instrument is initially recognized, it shall be measured by obtaining the corresponding fair value. In the subsequent measurement, FASB (Financial Accounting Standards Committee) believes that fair value should be the only measurement attribute of derivative financial instruments, and the initial recognition amount of derivative financial instruments should be adjusted to the fair value on each reporting day. On the other hand, IASC (International Accounting Standards Committee) imposes restrictions on the valuation of fair value, requiring that derivative financial instruments whose fair value cannot be reliably measured should still be reported at the initial recognition cost, and requires? Derivative financial instruments held to maturity? Do the same thing. That is, the measurement basis is determined according to the manager's intention. IASC pays more attention to prudence and reliability in the follow-up measurement of derivative financial instruments, mainly because the financial market and pricing technology are imperfect, and the development and application level of derivative financial instruments in different countries are uneven.
At present, China's effective market is not mature, so we can adopt the method of combining historical cost and fair value proposed by IASC. But in the long run, it will be the general trend to take fair value as the measurement attribute of derivative financial instruments.
refer to
[1] Wang Buyi, Shao Yongjun. Enterprise foreign exchange risk management in the era of floating enterprises [J]. Investment and Financial Management, 2006, (5).
[2] Jiang Yuqing. Foreign Exchange Risk and Management of Multinational Corporations [J]. Financial Securities, 2006, (9).
[3] Song Jucui. Enterprise foreign exchange risk management strategy [J]. Management World, 2006, (8).
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