An Empirical Study On Using Effect Of Fair Value

Both Financial Accounting Standard Board and International Accounting Standard Board are transferring from historical cost accounting to fair value accounting in making accounting standards. It is no doubt that such a transfer has exerted a significant influence on international financial accounting theory and practice. Extensive application of fair value measurement has induced an intense controversy not only between academe and accounting practitioner, but also between accounting standard setters and certain supervising bodies. Specially after the financial crisis of the USA, the criticism became more and more .In order to strengthen harmonization and convergence between Chinese Accounting Standards and International Financial Reporting Standards Accounting Standard for Business Enterprises promulgated in 2006 by Chinese Ministry of Finance adopted fair value measurement on a large scale. And faire value gets the major measurement attribute of some assets.Under the background of fair value measurement coming into the general trend, this dissertation focuses on the following issues on fair value accounting based on overseas and domestic related research results. This dissertation tries to investigate whether application of fair value measurement has improved accounting information quality of Chinese listed companies. Findings show that fair value has incremental value-relevance as a whole both in Year 2007 and 2008,compared with Year 2007, accounting data has a better explanatory power to share price in Year 2008.Fair value correlates with managers' earning. To further examine fair value value-relevance, this dissertation examines robustness from two different angles. It's result consists with the result of price model and income model, and this indicates fair value has value-relevance.The major contribution of this dissertation is: this dissertation investigates the value-relevance of available-for-sale financial assets and financial assets held for trading separately and proves that the two financial assets' fair value each has incremental value-relevance, which means the application of "fair value" in new accounting standard has increased the usefulness of accounting information and met the accounting standard maker's expectation.