Theoretical Study On The Relevance Of Fair Value

So far from the end of the 20th century,fair value has been a world issue concerned by the theoretical and practical circle,people has been rising enthusiasm for the study.During the study process,from all walks of life have generally reached a consensus on a number of issues,such as fair value can predict in time,feedback from firm performance , and become the most relevant measurement model for financial assets.However,behind the spreading global financial crisis,fair value of which formed the foundation and its economic consequences,the complain on the relevance of fair value has become a new focus of debate.On the basis of above background,the paper chooses the hot problem on the relevance of fair value to study.Firstly,the content,attributes and characteristics about fair value are expounded,the application condition and its application situation in China are summarized,especially analyzes the reliability and relevance of fair value which are two core characteristics of information quality from the aspect of decision usefulness is emphasized in the theory.In view of scholars at home and abroad who carry out normative and empirical researches on the relevance of fair value failed to obtain the same conclusion,especially empirical researches must consider other factors.Therefore,the paper presents theoretical modeling approach to explore the problem about the relevance of fair value.Firstly,the paper organically combines three-dimensional mathematical definition on information relevance with three relevance characteristics including predictive value,feedback value and timeliness,then from the study perspective of liabilities,structures a theoretical model about external economic environment,fair value of liabilities and firm value,and applies this model to analyze whether investors in a simulated economic environment can determine external economic environment according the disclosure of fair value,and make right investment decision.Theoretical study concluds that fair value of liabilities can transfer the information about the changed external economic environment,but investors can not discriminate which economic environments faced by the firm,and it is difficult to accurately determine the change in firm value.Therefore,the relevance of fair value of liabilities is not strong. On this basis,the paper continue to analyze how to improve the fair value of liabilities.The paper uses economic profit as an auxiliary variable to enhance the degree of relevance of fair value.The result shows that the information set including economic profit and fair value has a good correlation.By virtue of this information set,investors can make the right decisions.