The Study On Relative Problems Of Fair Value Measurement Attribute

With the development of the economic, there are more and more financial instruments. It is a challenge for original cost which can't match the accounting report users'requirement. In the new accounting standard which issued in 2006, fair value measurement has been used in the accounting calculation. It is not only according with the mainstream of the International accounting development, but also fit to the economics. Although, in china, the road of fair value developing is not smooth, we believe nobody can block it in future. In this paper, we don't want to discuss if it is necessary to use fair value in China, because it has been a reality, what we focus on is the fair value's impacts on the financial and management performance.In this paper, we look back the fair value development in China and introduce how to use it in new accounting standard. Take the"Real property investment","Debt restructuring standard","None-monetary asset swap""Short term investment"as examples, we discuss the fair value impacts on the financial and management performance.Although fair value is only the adjustment of the potential income, can't increase the enterprises'value, but it leads to an enormous impact on the financial statement, and the degree of this impact is difference due to principle. Because of the good business condition, for the enterprise that has many real properties and short term investments, net income will increase enormously. On the one hand, it enhances the returns on net assets; on the other hand, enhances the earnings per share, both of them are indexes which used to examine the operation performance. That means for the enterprise which uses fair value as a measurement, it will be easier to get financing in the capital market. For the entities who restructure the debt, if we can confirm the gain or loss which occurred during the debt restructuring, the usage of the fair value doesn't impact the debtor income. But if entities refund the debt by inventory or stock, fair value measurement can enhance the enterprises'productiveness. So the enterprise, especially the ones who need the loans, will be glad of the methods that refund the debt by inventory and stock.The usage of the fair value will impact the operating activities. As we know, fair value measurement can impact the ones who have many real estate investments. So the enterprise will make a decision carefully how to transfer the real estate investments to others. Only when the enterprises don't want to transfer the real estate investment recently, the decision that converts the real estate investment to inventory should be made. Moreover, when the marketable value enhance, it is a good choice to keep the real property as an investment. In that case, both of the rental and the fair value increase can be booked into income. When we are enjoying the income which got from fair value, we must know that there is some risks if we use fair value measurement which is a challenge for the risk management. In order to avoid the risk, more and more stock futures and interest futures are used and it leads to more requirements of the futures. Besides above impacts, fair value measurement spurs the enterprise refund the debt by inventory or stock. It is because that the refund debt by inventory is treated as the transaction, which enhances the productiveness of the entity. So in the future, refund by inventory or stocks will become the main method of the debt restructuring and the non-monetary asset swap.Uncertainty factors in the fair value measurement increase the probability of the earning management. For examples, enterprise can overrate the fair value of the real estate investment by estimate; can confirm the fair value gain or loss for the assets which are used in debt restructuring or the non-monetary asset swap; and they can get some good assets by affiliated transaction in a low price to make some income at the end of period. Government should pay more attention to these earning management activities; make up related standard to avoid them.It is clearly that there are some difficulties although we will use fair value in 2007. For instances, we can't get fair value on time although there are active market; so many factors need to be estimated when we want to compute the present value; the method to estimate the assets is still not perfect. All of these decrease the fair value's dependability. In order to change this situation, we must go on studying the theory of the fair value measurement, make up the fair value principle, clear the process of the assets estimated, establish the fair value audit system. Only improved on above aspects, fair value can implement successfully.2007 is the first year of the new accounting standard implement in China, fair value impact will appear. We will pay more attention on the fair value theory and its impacts on the financial and management performance in 2007.