Research On The Decision Usefulness Of Fair Value

The reason why this paper discusses on the topic of "Decision Usefulness of Fair Value" is to provide a theoretical basis and practical guidance for the development of domestic accounting standards and corporate accounting and financial practices. This study uses both of the normative research methods and the empirical methods, and disusses the decision usefulness of the fair value from three aspects of theory analysis, empirical testing and decision-making applications. Firstly, based on the theoretical basis of the Series Statement of the United States Financial Accounting Concepts and Financial Accounting Standards, we discuss the concept and the characteristics of the fair value, the relationship between the fair value and objectives of accounting, the qualitative characteristics of the decision usefulness of the fair value. We construct a theoretical analysis framework of decision usefulness of the fair value and, based on the agency theory and corporate contractive theory, we develop the system guarantee mechanism of the reliability of the fair value by game analysis. Secondly, by sorting out links between the fair value and the enterprise value, the fair value and the share value, we amend and then construct the empirical model investigating value-relevance of the fair value, and then test the value-relevace of the fair value in the Shenzhen A-share Market. The results suggest that the market reacts, merely in short term, to the fair value changes included in the current profits, which shows certain incremental information content of the fair value. In the long term, investers will pay more attention to the assessment of enterprise copacity of long-term profitability and growth (that is self-created goodwill). Finally, we discuss the applications of the decision usefulness of the fair value in practices from two different points of view of the market and enterprises. This study constructs the investment valuation model of enterprises under the fair value accounting, points out the fair value improves the market transparency of accounting information and enhancing the effectiveness of the capital market, and elaborates influences brought by the fair value accounting to the enterprise internal financial management and decision-making. The main conclusions of this study are as follows: the fair value reflects the enterprise economic reality better than the historical cost, an important aspect of the decision usefulness of the fair value lies in that its definition of "Exit Price" separates the capacity of enterprise residual profitability from the specific pricing projects, which facilitate the assessment of the value creation capacity and the investment value of enterprises based on the comparative basis, and promotes effectively the scientific and rationality of enterprises internal financial management and decision-making.