Empirical Research On Fair Value Measurement's Impact On Earnings Conservatism

Since the implementation of new accounting standards, the number of listed companies introduced fair value into the measurement and presentation of their related assets has been increasing year by year and the changes it brought into Chinese capital markets have attracted more and more attention of the academia.The research on the impact of the implementation of fair value measurement on accounting information of listed companies in China is of important theory value and practical significance without any doubt.From the angle of conservatism,this paper analysed the impact that might have been brought into companies'earnings conservatism by fair value measurement in theory at first;then by using improved Basu(1997)models,it tested the overall level of earnings conservatism of the A-share listed companies in China, compared changes in the level of earnings conservatism two years before and after those listed companies introduced fair value into the measurement and presentation of related assets;at last it analysed the correlation between earnings conservatism level of those listed companies introduced fair value into the measurement and presentation of related assets and their profit and loss from fair value changes through the method of price-to-book.By empirical analysis,main conclusions are as follows:first,the earnings information of China's listed companies are conservative in general;second,the listed companies' conservatism level went down significantly after fair value was introduced into the measurement and presentation of related assets; third, the changes in earnings conservatism level is negatively correlated with accrued profit and loss from fair value changes.Based on empirical results we believed that the implementation of fair value measurement reduced the level of earnings conservatism of listed companies in China and increased the difficulty of and the risk of audit;on this basis we also made some policy recommendations,we should improve the related fair value accounting standards,establish fair value measurement standards which suit to China's national conditions and strengthen the audit supervision on fair value measurement to reduce the risks in fair value application field.