Research On The Relevance And Reliability Of Fair Value

Measurement is the core of accounting.With the development of economy, a variety of uncertain environmetal factors with which enterprises confronted are increasing everyday.The defects of static and traditional historical cost measurement become obvious everyday. Historical cost measurement information's relevance is poor, and it induce information users to make wrong decisions possibly. Even the authenticity of historical cost measurement information is questioned.As a result, People focus on the fair value measurement which is based on the current and orient towards the future, risks and uncertainties. Financial Accounting Standard Board (FASB ) started the item of"Fair Value Measurement"since 2003, and after three years, FASB issued Statements of Financial Accounting Standards No.157"Fair Value Measurement"(SFAS157) at September 2006. China's Finance Ministry issued the new accounting standards system which lead in fair value measurement attribute and extended the application of fair value on February 15, 2006. Subprime mortgage crisis brought about controversy and questions, which called for concerted effort to study fair value.It can be seen that the issue of fair value measurement has become a hot and difficult topic for theorists and practitioners at home and abroad. The information Information quality of fair value is more concerned and widespreaddebated by a number of scholars. Reliability and relevance is the basic standards of accounting information. High quality accounting information is the guarantee of information user'decisions and the achievement of accounting objective.Based on the above background and the importance of accounting information quality, the author establish the topic"Research on the Relevance and Reliability of Fair Value".This thesis uses standardized research method primarily.Based on the rewiew of concept, and seriouly considered influencing factors and access channels, the thesis analyses the basic quality of reliability and relevance and tests the value relevance of fair value by emperical method. This thesis reads as follows:Chapter 0 introduces the research background, domestic and foreign references, research significance, research method , thought and so on.Chapter 1 reviews the history evolution and accounting connotations of"True and Fair"concept. And then the author elaborates the definition and analyses the application status in China and other countries, international organizations. Besides, the chapter discusses the view that"fair value is the inevitable choice of accounting measuremen under the market economy".Chapter 2, Access to fair value accounting information. Quality of accounting information depends on the recognition method and procedures. This chapter analyzes the factors that affect the acquisition of the fair value firstly. Then, the chapter analyzes access channels of fair value, including two cases: First, there is a real trading assets or liabilities of the initial measurement, and second, there is follow-up measurement without real transaction. For subsequent measurement, it need market information available to determine fair value hierarchy. Finally, the introduction of the fair value measurement of the third hierarchy on the valuation methods, including market approach, income approach and cost.Chapter 3, Combined with the previous chapter of access to fair value and according to FASB basic accounting information quality characteristics, From the perspective of predictive value, feedback value, timeliness and verifiablity, neutrality, authenticity which is the main contents of relevance and reliability, the thesis analyses the relevance and reliability of fair value information and the relation between relevance and reliability.Chapter 4 applies the empirical methods of price model and income model to verify the relevance of fair value contributing to enhancing the explanatory power of accounting information to stock price in China and . verifies the consequence in agreement with previous chapter.Chapter 5, conclusions and limitations. This chapter summarizes the conclusions and the limitations of this article.The innovation of this thesis includes the following two aspects:Firstly, From the perspective of predictive value, feedback value, timeliness and verifiablity, neutrality, authenticity which is the main contents of relevance and reliability, the thesis analyses the relevance and reliability.Secondly, To avoid price model'and income model'shortcomings, the thesis uses two models and selects the data before and after the implementation of new accounting standards to test the value relevance of fair value information.