Analysis Of How Fair Value Impacts The Profit Of Listed Company Under The Accounting Standard For Business Enterprises

Ministry of Finance launches the new Accounting Standard for Business Enterprises in February 15th, 2006. From Jan 1st, 2007, new Accounting Standard for Business Enterprises has been carried out in listed companies first. There are many chances in the new standard compared to the old one. Carrying out the new accounting standard will deeply impact financial soundness and management performance of companies. The highlight of the new accounting standard is the breakthrough on historical costing principle while it places strong emphasis on fair value for coordination and consentience of international accounting standard. The new accounting standard counts more changes of the fair value of assets and liabilities into revenues, which matches the revenue-expense principle better. At the same time, it has deep impact on the revenue of listed companies. This essay mainly discusses the change of revenue affected by use of fair value in comprehensive and systemic way.As users of financial data and information, they value revenue the most. Through scientific use of fair value, all the users of financial data and information can get access to the real value of assets and liabilities a company holds currently, including investors, creditors, government and related departments and the public. As a result, they must fully understand what the new accounting standard will impact on the financial statements of a listed company and see the real management performance and internal risk through financial statements. Then they can gain enough information the decision making by using new accounting standard. In a word, this essay has a realistic and urgent meaning.All the transactions involving fair value, transactions of financial instruments are majority. So the essay set financial instruments as examples to analyze the impact on listed companies by fair value. The essay analyze data in 2006 and 2007's financial statements of listed companies in Shanghai Stock Exchange in order to find out the impact on listed companies by fair value, which means a lot to investors about their knowledge and outlook about the current financial soundness, management performance and internal control of a list company.At the same time, I collect samples of 607 A-Type listed companies in Shanghai Stock Exchange about their financial statements. I adopt descriptive statistics to evaluate the impact on revenue of listed companies when using fair value in exchangeable financial instruments.1. The use of fair value intensifies the fluctuation of revenue.2. The use of fair value prevents earning-management in to certain extent. According to conclusion of my essay, I have some advices as follows: First of all, we should recognize the revenue fluctuation caused by the use of fair value and try to reduce the possibility of bad influence on the economy. Second, we should reducing the uncertainty of information when report on fair value. Third, leveling up the requirements of users of financial information and accounting staff. Fourth, we need to develop a framework for the application of fair value. At last, we should improve the construction of essential resources market of China for the application of fair value.