Research On Relevance Between Fair Value And Accounting Information

The fundamental objective of financial statements is helping to make decisions. Furthermore, value-relevant and reliable to investors is the most important quality characteristics. Companying with economic development and so much financial innovation appearance, the shortcoming of historical cost become increasingly evident and fair value measurement is being adopted. Recently, in order to improve the value-relevant of accounting information, International Accounting Standards Board and Financial Accounting Standard Board take the fair value as an important measurement property included in their accounting standard, which can reflect the true of assets and earnings, provide useful information for decisions as well. With the development of China's capital market, Ministry of Finance put fair value measurement into accounting standard, which come into effect since January 1, 2007, under the background of international convergence of accounting standards. However, many questions become hot topics, such as if the second application of fair value measurement make the accounting information value-relevant and go against the purpose of original application. The dissertation elaborates academic achievements of domestic and international, related theory of fair value measurement and value-relevant. We add new variables to price model and income model for correlation analysis and regression analysis on accounting data since fair value measurement applied. And then verify the correlation between the new variables and the price of stock, if the accounting information is value-relevant as well. We draw the conclusion and come up with rational advice for fair value measurement applied in China by normative analysis and empirical research.The conclusion of this dissertation is that both historical cost and fair value have their advantages and disadvantages, scope and conditions. fair value measurement is the most,even the only, relevant of financial instruments and derivative financial instruments, however, it is difficult to implement because of its poor reliability and operational. The balance between value-relevant and reliable of accounting information depends on accounting objectives and economic environment. We concluded after empirical research that there is a positive correlation between stock price and fair value gains and losses of trade's financial assets and available-for-sale financial assets, regression coefficient is significantly different from zero as well. It suggests that fair value is value-relevant since the implement of New Accounting Standards, which improve the quality of accounting information and enhance the usefulness of accounting information in decision-making.