Research On The Use Of Fair Value In China's Commercial Banks

The development of Fair value in China has gone through a repeated tortuous process. The China Ministry of Finance issued 39 new business accounting standards (including a basic criteria and 38 specific Guidelines) and 48 certified public accountants auditing standards in the Accounting and Auditing Standards System Conference on February 15,2006.All these standards were required to be carried out among the first listed companies in China since January 1,2007, other enterprises were encouraged to carry out these standards as while. The introduction of Fair Value became a bright spot in this significant accounting reform. The release of these guidelines also marked the beginning fair value's practicing phase in the accounting measurement of China.The global financial crisis triggered by the U.S. sub-prime crisis in 2008 made people reconsider the value of fair value being an accounting measurement's attribute. Both internationally and domestically, the controversies between the accounting theory and practical community sectors did not subside yet. In China, many problems inherent in the use of fair value measurement because of the complexity of China market environment and the less development of corresponding laws and regulations. Those problems even caused a strong impact on the banking business. Many parties criticized the value of fair value measurement model. We should take seriously the experiences and lessens learned from the United States and other developed countries and maintain a cautious attitude. By actively studying the fair value theory, we can refine the application of this measurement method supported by a strong theory basis.In this work, we studied the effect of fair value on the banking business. This study has important theoretical and practical significances. On one hand, it helped us to clarify our ideas, and think carefully that whether we should carry out the measurement method of fair value under the current international and domestic economic environment; on the other hand, by exploring the possible problems triggered by the expanded application of fair value in China commercial banks, we proposed to provide some appropriate answers on them. We also thought about how to establish a sound market coordination mechanism addressing the difficulties of fair value measurement method's application in China commercial banks, and provide some references for the banking industry or its external stakeholders.Our conclusions are:(1) Many problems were found existing in the application of fair value measurement model in China commercial banking business after both theoretical research and empirical analysis. They might have a negative effect on the development of commercial banks, or even on the overall operation of macro-economy; (2) The existence and development of fair value measurement mode are inevitable in the history of international accounting system development. To conform the pattern of international economic development, it is necessary to carry out the fair value measurement during inter-bank business. Many measures should be taken to create an friendly environment for the appropriate application of fair value measurement method in China commercial banking, such as improving the market mechanism, enhancing the effectiveness of estimation methods, improving the flexibility of accounting and auditing patterns, establishing and perfecting the asset evaluation institutions, strengthening the internal control risk prevention on banks, and strengthening the supervision cooperation of financial regulatory authorities.