Study On The Economic Consequences Of Fair Value

The Historical Cost Measurement, which is based on the Traditional Accounting Theory, is one ofthe main measurement attribute in our country, its reliability quality characteristics make it to getattention since all the time. However，significant changes have been happened to the marketeconomy since1980s. The facts had a challenge with historical cost accounting, and fair valueaccounting was emerged, which included the uncertainty and virtualization of the economicenvironment, the concern of market participants were changing and the large scale introduction offinancial innovation and financial derivatives. Due to the new and transitional economy of ourcountry, the improvement of fair value measurement is a serious problem, especially the accessissue of fair value under the condition of that the market was inactive. It requires a reasonablemeans and operating standards in order to improve the operability of fair value.Fair value has been widely used in our country since the new accounting standards issued in2006,however it didn’t achieve the desired results due to many factors, so further improvement oftheories and practices was needed. Firstly, theoretical analysis of hierarchical theory and obtainedtechniques; secondly, prove the advantages and disadvantages situation of the use of fair valuethrough positive evidence; finally, analysis the application issues and put forword the relatedpolicy recommendations. Fair value measurement is a “double-edged sword”, it appears with thedevelopment of market economy, but it will bring a fatal blow to the market economy if usedimproperly. The double measurement attribute of fair value and historical cost is the objectiveselection, because the special of our country’s market economy. We will use the fair valuecautiously based on the historical cost, the coexistence of multiple measurement attributes will bethe development of financial report. We are supposed to discover and solve problems in order toimprove the application of fair value and better serve the market economy in China.