Research On The Decision Usefulness Of Fair Value

Fair value originated in the concepts of true and fair that were used to evaluate the quality of financial statements. Fair value is highly valued and more and more applied by standard setters. With the developing of the economic environment and the deepening of fair value accounting practices Continuously, the fair value has been widely used, and gradually become the development trend of international accounting. It is used in current Chinese accounting standards carefully and fully. May 2011, while IASB and FASB jointly issued the " Fair Value Measurement ", the world’s major accounting systems have achieved the unification of the fair value measurement. However, while during the recent global financial crisis, fair value is suffered criticism heavily, the focus of attention is Whether it is able to exhibit the actual condition of a business in a reliable and sustainable manner, and to provide users with accounting information of decision usefulness.This study uses both of the normative research methods and the empirical methods, and discusses the decision usefulness of the fair value from two aspects of theory analysis and empirical testing. Firstly, based on the theoretical basis of the Series Statement of the United States Financial Accounting Concepts and the current accounting standards of china, we discuss the concept and the characteristics of the fair value, the relationship between the fair value and objectives of accounting, the qualitative characteristics of the decision usefulness of the fair value. Then, we construct a theoretical analysis framework of decision usefulness of the fair value based on the Efficient Market Theory. Secondly, by sorting out links between the fair value and the share price, we construct the empirical model investigating value-relevance of the fair value, and then test the value-relevance of the fair value in the Shanghai B-share Market and Shenzhen B-share Market. The results of the research confirm that the market reacts that, in condition that China’s stock market hasn’t achieved one of the forms of Efficient Market, the fair value information of studied samples possess significant value relation and information content. Meanwhile, market responds more fiercely to the items measured in fair value and recorded in the capital reserves than that in the current profit or loss. The Study findings confirmed that the fair value information from Chinese listed companies enhanced the Decision usefulness of accounting information. Thus, china should consider to expand the use of fair value in accounting standards in wider range in moderation.