Research On Accounting Recognition Of Perpetual Bond Under New Regulations

As a hybrid financial instrument,perpetual bond has dual properties of liabilities and equity.When accounting for perpetual bond,the issuer can divide it into equity instruments or financial liabilities.Different division results will have different impacts on corporate finance.Although most enterprises in the market initially recognize the perpetual bonds as equity instruments,However,in January 2019,new regulations on perpetual bonds were issued.The new rules mainly make supplementary provisions on the accounting analysis of the interest clause and repayment sequence clause in the perpetual bond contract,such as stipulating that when the interest rate in the interest rate jump clause is not capped or exceeds the average interest rate of the same period,the perpetual bond should be classified as a financial liability.This also makes it more difficult for perpetual bonds to be directly classified as equity instruments,so after the promulgation of the new regulations,some enterprises began to reclassify perpetual bonds.In this context,because few articles study on perpetual bond before and after the new rules of accounting recognition problem,so this research will revolve around the following questions: How to construct the accounting recognition process of perpetual bonds before and after the promulgation of the new regulation in combination with the contract terms of perpetual bonds? Whether the accounting recognition results of enterprises in issuing and reclassifying perpetual bonds are reasonable? What impact will different accounting recognition results have on enterprises?This paper adopted the method of case study,first of all to the international accounting standards,accounting conceptual framework,and on the basis of the accounting standards in our country,analyzes the definition of liabilities and owners’ equity.On this basis,this paper analyzes and summarizes the methods of distinguishing between liabilities and equity,financial liabilities and equity instruments,and constructs the flow chart of distinguishing between financial liabilities and equity instruments.Then,the typical research object is the ST-Yihua perpetual bond issued before the promulgation of the new regulations,which is divided into equity instruments and reclassified as financial liabilities after the promulgation of the new regulations.This paper introduces and analyzes the motivation and process of "ST-Yihua" issuance and reclassification of perpetual bonds based on the general situation of market perpetual bonds issuance.Then,combining with the accounting recognition process of different stages,the rationality of accounting recognition results in "ST-Yihua" issuance and reclassification of perpetual bonds is analyzed.Through the combination of theory and case analysis,this paper draws the following conclusions: On the one hand,the accounting recognition of perpetual bonds should be combined with the specific analysis of the redemption clauses and interest clauses in the contract,and the judgment should be made according to the economic substance reflected by these clauses.Perpetual bonds accounting confirmation,on the other hand,there is a subjective judgment of space,so "ST-Yihua" accounting personnel in the subjective judgment,may make this clause has the rights for the motivation of special features of the judgment,but their accounting confirmation still meet the requirements of the standards and related process,so you can think about its perpetual bonds of initial recognition and classification result is reasonable.On this basis,the paper analyzes the problems existing in the accounting recognition of perpetual bonds before and after the promulgation of the new regulations.For example,the relevant standards are not specific and perfect enough,and accountants can divide perpetual bonds into equity instruments through subjective judgment so as to beautify statements.Finally,in this paper,on the basis of the above conclusion from regulators,perpetual bonds issuers,investors are proposed,and the three levels including that the regulators should strengthen the perpetual bonds accounting under the new rules to confirm the rationality of the results of the inspection.Issuers should judge the rationality of accounting recognition results of existing perpetual bonds based on the new rules,and investors should strengthen learning from the new rules to identify the potential financial risks under perpetual bonds.The possible contribution of this paper is that it constructs the accounting recognition process of perpetual bond before and after the promulgation of the new regulation,which can help enterprises standardize the accounting treatment of perpetual bond.In the context of the promulgation of the new rules on perpetual bonds,this paper also has guiding significance for the reclassification of perpetual bonds with various combinations of clauses of different properties.