Look At From The Perspective Of The Accounting And Financial Asset Securitization

The year of 2005 is called "the year of asset securitization" byChinese financial circles. In this year financial institutions are activelyprepared for approaching "surge" of asset securitization with the ChinaDevelopment Bank and China Construction Bank being set as theexperimental unit and a series of necessary regulations being implemented.Recently asset securitization is the most important subject in financialinnovation. Asset securitization, as a financing method, is more adaptablethan traditional financing method, such as debt and equity. Financialinnovation takes place in complicated commercial environment .There is noexception to asset securitization. Under current circumstance, there is a longway to go to carry out asset securitization in practice rather than just study itin theory. Although the conditions in our country permit the implementationof asset securitization, there are still obstacles such as underdevelopedcapital market, legal obstacles to asset securitization, accounting problemsand so on. This paper aims to review asset securitization from financial andaccounting perspective. Firstly, this paper discusses the meaning and fundamental principlesof asset securitization and introduces the basic theories about it in brief.Then it analyses the economic benefits that asset securitization can bring tothe originators, investors and the society and economy. The benefit of assetsecuritization facilitate it develop word wide. But now in our country thereis no accounting standard that can guide the accounting treatment. Thispaper discusses the accounting treatment of asset securitization, such asaccounting recognition, measurement, consolidated financial statementsrequired in asset securitization and disclosure and based upon these somerelated recommendations are proposed while considering the status quo inour country. In practice, it is necessary to value the securitized assets andanalysis the related risks. This paper introduces the financial techniquesused in valuation and the risks in asset securitization and how to preventthese risks. Finally, the paper proposes some suggestions to improve thedevelopment of asset securitization.As a new financing method, asset securitization not only providesmore favorable foundation for enterprise development and economicdevelopment but also provides wider room for the capital market to develop.