The Impact Of Fair Value On Earnings Management

The new General Accepted Accounting Standards which has implemented since January 1, 2007 involves a lot of fair value. Some people worry that use of fair value will cause behavior of managers'earnings management and infringe on the interests of investors.This paper combining norms research and empirical research analyzes how the fair value affects the earnings management. First, on the basis of the existing research at home and abroad on this study, I determined the methods. Then, give an accurate definition of the two concepts, the fair value and earnings management, review the development process of the fair value in China, elaborate the new range of applications of the fair value in The new General Accepted Accounting Standards, and analyze from theory how the fair value affects the financial position of listed companies after its introduction so that we can analyze the possibility the fair value become the one of means of earnings management. Then, on the base of the theoretical analysis, we choose real estate listed companies as the research objects, make assumptions, and build a new model which can reflect the relationships between the fair value and the earnings management based on the modified Jones model, at last, we will verify the research hypotheses with the statistical analysis tools.On the above work, we make a conclusion, that in our existing market and policy environment, the relationship between the application of fair value and the earnings management is significant, so fair value will be a mean of earnings management of listed companies. Finally, for the research findings, we give suggestions to prevent abuse of the fair value on earnings management and improve the use of environment.