Fair Value Measurement And Applied Research

Initially, the concept of the fair value is not applied in the accounting area. It had not appeared in the initial measurement of the intangible assets until the fifties of 20th century. After that, the accounting treatment on convertible bonds and subscription warrants, accrued interest, receivable interest and so on also started to try to use fair value measurement model. With the further development of capital markets, financial instruments developed rapidly, and losses and risks coursed by them gradually increased and got attention. At this time the fair value measurement model became one of the most important measurement models in financial instruments. After the nineties of 20th century, the scope of the fair value measurement was gradually beyond the financial instruments, demonstrating the trend of overall measurement. According to incomplete statistics, there have been more than 70%of the SFAS issued by U.S. Financial Accounting Standards Board that involved fair value since the 90s of 20th century; and in the situation of International Accounting Standards Board, there have been more than a half.While the fair value model was widely implied, the controversy surrounding fair value measurement has never stopped. In 2008 the burst out of global financial crisis triggered by the U.S sub-prime mortgage crisis pushed the dispute to the peak. United States Banking Association (ABA) and International Finance Association (IIF) as the representative of the opponents expressed strong opposition on fair value measurement. They figured that using the fair value measurement model on certain financial properties in a declining market might cause a worse future expectation and therefore declined confidence on the market, exacerbating or enlarge the U.S. sub-prime mortgage crisis and the global financial crisis. They argued that the fair value measurement model should be suspended. Meanwhile, as the representative of the accounting standards setters, the United States Accounting Standards Board (FASB)and International Accounting Standards Board (IASB) believed that financial crises should not be attributed to fair value accounting, and fair value accounting should not flatly denied as the fair value model was still the only viable method on many items of the balance sheet. Securities and Exchange Commission (SEC) submitted a report on the fair value measurement to the U.S. Congress in December 30,2008 after three months of intensive research, in which SEC positioned as the strong supporter of the fair value measurement accountings. More practice also shows that the fair value measurement model has become the future direction of development of accounting pattern and one important indicator of the convergence between "system of accounting standards" and the International Financial Reporting Standards.The application of fair value measurement also appeared fickle in our country from 1997 to now, as which could be described as twists and turns, and processed in three phases:fair value had been introduced-to avoid use of fair value-re-using the fair value. In the new accounting standards promulgated in 2006, fair value was re-described as one of the basic measurement properties, and pointed out as the main measurement method on financial instruments and other assets. Therefore, the research and improvement on the theory connotation, measurement model and the consequences of the application of fair value become our urgent problems. In view of this, we start the text following this framework:Chapter 1. Introduction. While introducing the background of this study, the significance of this study is expounded from the theoretical and practical aspect. Domestic and international research literatures on fair value accounting are summarized from the three aspects, the theoretical study, accounting standards and empirical data. Research methods, basic framework, possible innovations and shortcomings are indicated.Chapter 2. Starting from the generation and history of the fair value accounting, the whole process including the prevalence of historical cost, f the implementation and promotion of replacement cost and introduction and gradual wild implication of fair value measurement in accounting after the generation of standard accounting is discussed, and the relevant Evolution and laws of the definition of fair value is analyzed.Chapter 3. Research on the reasons of the implication of fair value. The question of why the fair value is used is discussed here. Using the method combining qualitative analysis and case analysis, the underlying reasons (ie, the superiority of itself), and external factors (that is, the inevitable result of changes in accounting environment) of the implication of fair value are discussed and analyzed in this chapter.Chapter 4.The essence and connotation of fair value measurement are discussed and analyzed from accounting and economics respectively. We think that the essence of fair value is the estimate on current market prices. The premise of fair value assumptions and market selection, valuation objects and the statistical properties and the economical basis of fair value measurement and financial accountings are further discussed.Chapter 5. The fair value measurement issues are focused on, including:analysis on fair value valuation techniques commonly used in practical affairs in China, the comprehensive fair value measurement model and analysis on its advantages and disadvantages and the mutual promotion between professional asset valuation and fair value measurement.Chapter 6. The practical consequences of the full commissioning of the rehabilitation guidelines for fair value property in China are empirically analyzed, including the empirical analysis on the impact on the share price.Finally, based on these studies policy recommendations are put forward in this article.Through this research, we draw the following conclusions:1. The generation and application of the fair value measurement model experienced three stages:introduced (to solve the problems of the specific assets'disclosure and measurement), expanding application (financial instruments measured by the fair value) and wide application (application scope extended to non-financial items). And the reason that it can be produced and widely used in recent decades can be analyzed in two ways:one is internal reason, which is the fair value measurement have the superiority of their own to meet the different needs of stakeholders; the other is external reason, which is the changes of the accounting environment provide the generation and application of the fair value a sufficient condition.2. Fair value is an independent accounting measurement, which has a clear view of the tense, market outlook and valuation objectives, its essence is to estimate the value of the current market, which has fairing, estimating, current, dynamic, comparability, no-total basic characteristic and so on, and in line with financial accounting goals and requirement of accounting information quality, it has important sense to perfect the financial accounting conceptual framework;3. Fair value measurement model highly dependent on the activity level of the market and the market prices. In different environments, we should choose different valuation techniques. When the market is in non-active environment, for brokers and value pricing service agencies to obtain reliable information is a way of fair value, so our country try to promote the fair value at valuation techniques and valuation theory, it should also accelerate the construction of an independent third party valuation system;4. The adoption of fair value measurement took different consequences to interested party. After our country re-used the fair value measurement model, it has had certain impact to investors, corporate management and securities markets. While empirical results also show that the value relevance of accounting information is improved and the investors and the stock market have had positive economic consequences after using the fair value measurement model.Finally, as the fair value measurement was carried out in China in a short time, promoting the fair value measurement model's full development, regardless of their own improvement, or from the construction of the accounting environment and the development of the accounting standards, has a long way to go.