Research On Fair Value Which Is Applied To Listed Company In Post-Financial Crisis

The Chinese government has been taking a prudent approach towards the applicationof fair value, which has gone through the three stages of adoption, prohibition andre-adoption. In order to keep up with the international accounting standard and at the sametime take China’s marketing conditions into consideration, the Chinese government hasadopted a cautious attitude of application with conditions regarding the re-adoption of fairvalue. The2008financial crisis, which was triggered by the sub-prime crisis, has had anegative effect on the application of fair value. For a time, whether or not the fair valueshould be abolished at all became a center of attention. Financial magnates represented bythe Wall Street blamed fair value for what had happened and won the support of the USpoliticians. FASB, the leader of the accounting field, backed down finally and admitted thatthe fair value accounting standards should be amended. The study of post-financial crisisapplication of fair value has therefore become very necessary.Starting from the theory, the essay introduces the essence of fair value, its applicationbasis and relevant accounting standards. Regarding its application, the author introducesthe historical evolution of fair value application and analyzes the international situationafter the financial crisis. The author believes that fair value was not the root of financialcrisis although it did aggravate its impact. The essay gives a general analysis on theapplication of fair value in quoted companies after the financial crisis, and based on the factthat there has not been a negative procyclical effect caused by fair value in China,summarizes the advantages of its application in China. The author then points out theproblems that have arisen in quoted companies after the financial crisis:1) The companiestend to avoid disclosing the disadvantages while giving full play to the advantages whenpublishing the information regarding fair value;2) Defective management structure;3)Shortage of high-level professional talents;4) Restriction imposed by the current marketingconditions;5) Insufficient knowledge acquired by the information users. The author putsforward the following suggestions:1) Construct a comprehensive supervisory system;2)Perfect the management structure of the public companies;3) Strengthen the training ofprofessional talents;4) Improve the marketing conditions for the application of fair value;5)Improve the professional quality of the information users by means of publicity andeducation;6) In establishing fair value accounting standards, principles should beformulated from the four aspects of concept definition, scope of application, metrological confirmation, presentation and publishing. The author selects Air China as an analysisexample to support the views outlined in the essay and concludes with prospects andprojections.