A Research On The Value-relevance Of Fair Value

With the continual development of the capital market and the improvement of the degree of the dispersed ownership, the accounting target has turned from the fiduciary duty concept to the viewpoint of decision usefulness. Meanwhile an American expert named Beaver pointed out that the highest goal of the accounting information was the usefulness of the decision-making. Measurement perspective advocates strengthening the availability of the accounting information to make useful decision by improving the method of measurement, which leads to the birth of fair value.About the related guideline of the fair value abroad appeared relatively early, but only until90s of the last century it has received important attention increasingly and aroused widespread discussion. At present, fair value has become the first choice of measurement basic in the International Accounting Standard and GAAP; also it has been regarded as the main measurement attribute of the following measurement of financial instruments. It has been very cautions when it comes to the use of the fair value in China that is the fair value was partly introduced to accounting standards but was deserted fully in2001; until2006the fair value was used popularly again in the new "Enterprise Accounting Standards" issued by the China’s Ministry of Finance at the background of the convergence of the IAS, along with the improvement of the china’s market economy. But China’s market environment is not so perfect as the international market, moreover there is still some difference when China’s enterprises are geared to the international context, including the lack of related experience in the practice area and the2008world economic crisis, above of which makes the use of the fair value get much suspicions. In such circumstances, to discuss the applicability of fair value in China and its results of the implementation is very necessary. Based the theoretical analysis and the empirical research this paper have some main conclusion as follows:These appearances suggests that in the financial reporting, changes of fair value which act on net assets has significant value relevance, so does the loss or profit from changes of fair value, which is that loss or profit from changes of fair value is correlated with the stock price and the earnings yield. And the value relevance of the profit from changes of fair value is more significant than the loss from changes of fair value. In companies whose net profits are positive and aren’t special treated (ST), larger the proportion of profit from changes of fair value in the retained profits is, more significant the value relevance of the fair value information. However, when the proportion is too large, the value relevance is lost.Compared to the net assets, investors pay more attention to the profit information; compared to realized income, the stock price and earnings yield are more depend on unrealized income caused by changes of fair value, it means that loss or profit from changes of fair value have more significant value relevance.The results of this study can effectively dispel doubts on the use of the fair value, and prove that the use of fair value in the new guidelines significantly increase the value relevance of the accounting information. However the fair value is a much complex system engineering, so we need to push the use of fair value moderately and steadily.