Study On Application Of Fair Value Measurement Mode In China

Although historical cost has been the main measurement mode for a long time, it is difficult for it to cope with the situation gradually, with the development of economy, especially coming forth of lots of derivative financial instruments. Therefore, a set of new Accounting Standards for Business Enterprises was issued by the Ministry of Finance of China on February 15th, 2006. It was one of the most striking features in the new accounting standards system that fair value accounting was re-adopted in accounting measurements.It is always controversial for the application of fair value in our accounting standards. It twists and turns. Our country does not have a specific theoretical framework for the fair value or the fair value measurement guidance for the implementation, and the related valuation technologies are imperfect. Then it is urgent to find a fair value operating system which adapt to the non-rational, non-active market conditions. That is the significance of this research and why I have chosen this topic as my master’s thesis against this background.Firstly, the concept and basic characteristics of fair value are described in this thesis. Furthermore,analysis the relations among historical cost, current cost, current market value, net realizable value, present value of future cash flows. It shows advantages of fair value. Secondly, combined the application of fair value in our three stages which are to promote the fair value, to avoid the fair value and re-introduction of the fair value, a detailed analysis of its lack is given. It founds the most prominent is the fair value valuation. Then, around this problem, a valuation model is established by Crystal Ball software. And specific improvements are given based on this model. Finally, it points that the quality of the information provided by the fair value will be fully improved and the dominant of fair value in our accounting standards will certainly be apparent increasingly, with more in-depth theoretical study of fair value and improvements of related practical operational guidelines.