| Since the outbreak of the financial crisis in 2008,the international community has been criticizing the old financial instrument standard(IAS 39).Critics believe that according to IAS 39,the impairment of financial assets were recognized by ICL model,resulting in a precipitous decline in the value of financial assets after the occurrence of impairment signs,without any warning before.At the same time,because most financial assets were measured at fair value,after a number of financial assets were impaired,the fair value of other benchmark financial assets in the market also decreased accordingly,resulting in a chain reaction and accelerating the deterioration of the financial crisis.At the G20 summit in 2009,leaders of various countries around the world called for the improvement of IAS 39.Even scholars have a heated debate on the role of IAS 39 in financial stability.Some people think that the application scope of fair value measurement should be reduced.Fair value accounting has hardly played a role in the financial crisis.The goal of financial reporting is to improve the information transparency of the capital market,which is inconsistent with the goal of financial supervision focusing on the stability of the banking industry.After the outbreak of the financial crisis,the liquidity of many financial instruments dried up,and financial companies had to value according to a small number of extreme transaction prices,resulting in a chain reaction through cross shareholding among financial enterprises.The other part holds that ICL model has hysteresis,and the impairment measurement method of bank loans should be improved.The interest charged by enterprises when lending funds and banks when issuing loans takes the expected credit loss into account.Under ICL model,the actual interest rate calculated in accounting does not take the expected credit loss into account before impairment is recognized.Therefore,the interest income recognized is high(Wang et al.,2014),but the credit risk loss is not recognized during this period,this leads to a mismatch between credit risk compensation and credit risk loss(Huang,2010).It is suggested to replace ICL model with a model considering potential credit risk.In order to achieve convergence with FASB and respond to the call of the international community after the financial crisis,IASB began to formulate IFRS 9 in2008(Zhang,2021).IASB issued the draft for comments in July 2009,and formally promulgated IFRS 9 financial instruments in November of the same year.After three revisions in 2010,2013 and 2014,the long formulation process was finally completed,and the formal revision of IFRS 9 in 2014 was completed.Compared with IAS 39,the main changes in IFRS 9 are that financial assets are classified into three categories through SPPI test and business model,impairment is accrued by ECL model,and the application scope of hedge accounting is expanded.In order to achieve the international convergence of accounting standards,the Ministry of finance of China promulgated CAS 22(2017)in 2017.At present,the research on the economic consequences of the new accounting standard for financial instruments is still in the blank stage.Therefore,based on the economic consequences framework of the reform of financial instrument standard,this paper studies the following issues:(1)Will the changes in the classification and measurement of financial assets by the new financial instrument standard(CAS 22)cause enterprises to dispose AFS and FVTPL financial assets? After disposing of AFS and FVTPL financial assets,do the enterprises meet their investment needs by establishing investment companies or holding entrusted financial management?(2)The new CAS 22 adopts the ECL model for impairment.As a new accounting item,can credit impairment loss provide effective information for users of accounting information? What factors will affect the value relevance of credit impairment losses? Does the ECL model provide more information than ICL model?(3)From the perspective of audit fees,this paper studies the implementation costs of the new CAS 22.Do the enterprises affected by the cancellation of "cost exemption" and the enterprises affected by the ECL model more increase the audit fees more? This paper also studies the moderating effect of property rights,internal control,marketization and audit firms on the relation between new CAS 22 and audit fees.Finally,this paper studies how the new CAS 22 affect audit fees.Taking A-share listed companies as the research sample,this paper studies the economic consequences of the new CAS 22 from the perspectives of corporate financial investment,the value relevance of accounting information and audit fees.The main findings are as follows:(1)Accounting standards changes the financial investment behavior of enterprises.Specifically,this study finds that enterprises holding AFS and FVTPL financial assets accelerate the disposal of these two types of financial assets after the announcement the new CAS 22.They accelerate the establishment of fund companies,investment subsidiaries and investment partnerships with other enterprise alliances for financial investment,and increase the scale of entrusted financial management.The cross-sectional study shows that state-owned enterprises,enterprises issuing bonds and enterprises with larger fluctuations in their main business profits prefer to dispose of AFS and FVTPL financial assets after the announcement of the new CAS22.Since state-owned enterprises have more ability and appeal to combine enterprise to invest,and state-owned enterprises can quickly finance from banks,after the announcement of the new CAS 22,state-owned enterprises have a higher frequency of newly establishing fund companies,investment subsidiaries or investment partnerships,and less increase entrusted financial management.The bond issuing enterprises themselves have insufficient funds,so they do not show more frequent establishment of investment companies,but increase more entrusted financial management.Enterprises with large fluctuations in their main business profits have poor comprehensive strength.Under the background that all enterprises generally increase the establishment of investment companies and entrusted financial management after the announcement of the new CAS 22,enterprises with large fluctuations in their main business profits do not show more frequent establishment of investment companies and entrusted financial management.This study also shows that the disposal of AFS play a partial intermediary role between the announcement of the new CAS 22 and the establishment of fund companies,investment subsidiaries or investment partnerships and entrusted financial management.(2)The change of accounting standards affects the value relevance of accounting information.Specifically,this study finds that after the implementation of the new CAS 22,the credit impairment losses accrued according to ECL model have value relevance.The greater the credit impairment losses accrued by enterprises,the lower the stock price of enterprises.At the same time,the value relevance of credit impairment loss is higher in financial enterprises,enterprises with good internal control,audited by big four,and involving the ECL model in key audit matters.Compared with ICL model,enterprises spend a lot of energy to implement ECL model,but it can’t improve value relevance generally.Only in financial companies and big four audited enterprises can the value relevance of accounting information be improved.(3)The change of accounting standards affects the audit expenses of enterprises.Specifically,this paper finds that after the implementation of the new CAS 22,the audit fees of enterprises increase significantly.When the audited company holds the equity investment originally measured by the cost method,and the audited company holds the more creditor’s rights that are not measured by FVTPL,the implementation of the new CAS 22 has a stronger role in promoting the audit fees.The crosssectional study shows that the increase of audit fees is lower in state-owned enterprises,enterprises with higher degree of internal control,enterprises with higher marketization and enterprises audited by big four.The new CAS 22 increases the audit fees by extending the audit time,improving the audit risk and pursuing higher audit quality.This paper has abundant theoretical significance and important practical significance.The theoretical significance mainly includes the following points:First,based on the perspective of the new CAS 22,this paper studies how the reform of accounting standards affects investment behavior,value relevance and audit fees.This paper enriches the influence theory of institutional change and the economic consequence theory of accounting standards.In addition,the current literature on the economic consequences of accounting standards reform mostly focuses on the economic consequences of the first implementation of IFRS or convergence with IFRS in a country or region.For example,Zhu et al.(2009)Dai et al.(2017)are all based on the background of China’s accounting standards reform in2007;De George et al.(2013)use Australia and Raffournier et al.(2018)use Swiss data to study the economic consequences of the overall implementation of IFRS.With the convergence of accounting standards in most parts of the world,IASB pays more attention to high-quality accounting standards for a single field.This paper enriches the literature on the impact of the reform of single accounting standard.Second,this paper enriches literature on fair value measurement,and subdivided the different impacts of fair value measurement in FVTPL and FVTOCI on enterprises.Most of the previous studies on fair value measurement only studied FVTPL or mixed FVTPL and FVTOCI as a whole.For example,Jia and Chen(2010)only study FVTPL.Liu et al.(2011),Magnan(2009)mix FVTPL and FVTOCI for research.This study further distinguishes the differences between FVTPL and FVTOCI,as well as their different impacts on enterprise investment behavior.This study shows that the adoption of fair value measurement is not the most concern of enterprises,Enterprises are most concerned about whether the fair value fluctuations are included in the current profit and loss or other comprehensive income,which has enriched the relevant literature of fair value measurement.Third,this paper fills the blank of ECL research.Using ECL model instead of ICL model to withdraw impairment is one of the most important changes in the new CAS 22,but there are few relevant studies.At present,there are only normative studies to analyze the formulation process,implementation difficulties and future impact on enterprises,and some case studies to analyze the impact of ECL model on financial enterprises.There is no literature using empirical analysis method to analyze the economic consequences of ECL model from the perspective of value relevance.This research fills the blank of ECL research and enriches the research on the value relevance of accounting information.Fourth,this paper enriches the relevant literature on the research of the new CAS22.As one of the most changeable and influential accounting standards in recent years,the new CAS 22 has attracted wide attention.All sectors of society are concerned about what problems will be faced and what consequences will be caused in the implementation of the new CAS 22.Previous literatures such as Wang and Liu(2014),Qiu and Qu(2016),Maria and Stefan(2019),Huang(2010)and Reitgruber(2016)all analyzed the impact of the new CAS 22 from the perspective of theoretical analysis,and empirical methods have not been used to test the economic consequences of the new CAS 22.This paper fills the gap in this regard.Fifth,this paper enriches the literature on financial investment behavior,value relevance and audit fees.In the past,most of the literature on corporate financial investment studied the motivation and consequences of corporate financial investment behavior,and a few scholars such as Ye et al.(2009),He et al.(2012),Zeng and Xu(2013)study how the accounting treatment of financial assets affects corporate financial investment behavior.This study shows that using FVTPL instead of FVTOCI to measure financial assets will make enterprises reduce financial investment and turn to more stable investment modes.This study enriches the relevant literature on enterprise financial investment behavior.The previous literature has rich research on the value relevance of accounting information.Accounting policy is the basis of accounting information,so it has an important impact on the value relevance of accounting information.Using ECL model to withdraw impairment is a new accounting treatment.There is no literature to empirically test its value relevance.This paper makes up for the gap in this regard.This paper analyzes the impact of the new CAS 22 on audit fees from three aspects: simplifying classification,broadening fair value measurement and ECL model.It also studies the three paths of prolonging audit time,improving audit risk and pursuing higher audit quality,which enriches the research on the impact of accounting standards on audit fees.The practical significance and policy suggestions of this paper are as follows:First,this study helps standard setters judge whether ECL model achieves the desired effect.Generally speaking,ECL model has value relevance,but it has no obvious advantages compared with ICL model.For most non-financial enterprises,the cost of establishing credit risk management system and hiring big four for audit is too high and not very necessary.Therefore,this paper suggests that only financial enterprises use ECL model to accrue impairment,and other enterprises still use ICL model.Second,this study reveals how the new financial instrument standard affects the financial investment behavior of enterprises,and answers the relevant questions in the post implementation review of IFRS 9(consultation draft)of the IASB.In order to avoid the impact of the fluctuation of the fair value of equity investment and the evaluation of the fair value,enterprises accelerate the disposal of AFS and FVTPL financial assets,and instead increases the establishment of investment companies and holdings of entrusted financial management,so as to make the enterprise’s investment strategy more stable,from short-term investment to medium and long-term investment.Third,this study reveals the implementation costs of the new financial instrument standard from the perspective of audit fees,and answers the relevant questions in the post implementation review of IFRS 9(consultation draft)of the IASB.Listed companies in China generally hold equity investments whose fair value is difficult to estimate.The new financial instrument standard forces the fair value measurement of these financial assets,which will bring higher audit fees and execution costs to enterprises,and it is difficult to ensure the rationality of valuation.This paper suggests that the financial assets whose fair value is difficult to estimate should still be measured by cost method.Fourth,the current accounting focus has shifted from truthfully reflecting historical information to helping accounting information users predict the future,involving more judgments on expectations,which puts forward higher requirements for auditors.Auditors need not only audit knowledge,but also broad knowledge;At the same time,the auditor’s reputation is more important.According to the research of this paper,after the implementation of the new CAS 22,more enterprises hire big four.Therefore,this paper suggests that relevant departments should strengthen the cultivation of high-quality auditors and speed up the cultivation of local accounting firms with high reputation and high international popularity. |
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