Fair Value Accounting Versus Accounting Conservatism

This paper studies fair value accounting,accounting conservatism and the relationship between them,based on which it discusses the implication for accounting standards setting.Firstly,in order to unify the premise of discussion,the paper restudies fair value accounting. It discusses the background from which fair value accounting stemmed and distinguishes the three basic concepts of fair value,fair value measurement and fair value accounting,which leads to the conclusion that both fair value and historical cost are independent accounting measurement attributes and fair value measurement refers to measuring certain assets or liabilities in terms of fair value,fair value measurement does not necessarily lead to fair value accounting,and only when occurred at reporting date, thus reflected in the financial statements, is it fair value accounting. Fair value accounting enhances the reliability of accounting information,thus enhancing the relevance of accounting information and helping information users with decision-making. Fair value accounting has replaced the accounting for price changes. Secondly,the paper makes a discussion of accounting conservatism,which includes the root,present research status,and economic consequences. Accounting conservatism exerts significant influences on accounting information quality,and it also affects stakeholders in their decision-making behavior.Thirdly,based on separate discussions of the two concepts,it concludes that there is consistent treatment of devalued assets,but when it comes to the treatment of assets appreciation,they contradict. In order to coordinate them,it suggests that assets be measured in terms of fair value in accordance with accounting conservatism.Finally,it discusses the implication for accounting standards setting. It recommends that only historical cost and fair value be kept as measurement attributes and "impairment of assets" and "changes in fair value," be uniformed as one,that is"changes in fair values," On this basis, intensive research efforts are required so as to set fair value measurement standards which are in line with accounting practice in China as soon as possible.