The Research On Application Of Present Value Idea And Technology In Fair Value Measurement

Measurement is the main point of accounting.“Fair Value Accounting is aaccounting model of21century" is already accepted by accounting academic circlesat home and abroad. Historical Cost Accounting can not keep up with the step of time,while the requirement of Fair Value is more and more strong. After the FinancialCrisis of2008, more and more people has realized the importance of Fair ValueMeasurement, especially the importance of Fair Value Measurement in markets thatare no longer active. In our country which has more non-active market，the recentlypublished <Accounting Standards for Business Enterprises No.×—Fair ValueMeasurement (Exposure Draft)>promised that Fair Value will soon be applied in ourcountry extensively. Present Value is the most important idea and valuationtechniques of Fair Value Measurement in non-active market. The article explainedinternational Present Value Measurement theory and methods, discussed theapplication of Present Value idea and technology in our country in three aspects: theestimate of cash flow, the determination of discounting rate and the reflection of riskand uncertainty.This article is divided into seven parts. Part I is introduction, it introduced thebackground, purpose and importance of the whole article. Part II discussed the basictheory and definition of Fair Value and Present Value, including MeasurementPerspective, Utility Theory of Value and Qualitative Characteristics of AccountingInformation and the definition of Fair Value and Present Value and the relationshipbetween them. Part III discussed the general application of Present Value, includingthe aim (overall and specific), general principles, elements and specific methods ofPresent Value. Part IV discussed determination of the variable in Present ValueMeasurement for Fair Value, including the determination of cash flow, discountingrate and risk. Part V is the introduction of methods of Present Value Measurement, itintroduced the application of Traditional Discounting Technique and Expected CashFlow Discounting Technique in Fair Value Measurement. Part VI is the enlightenmentfor application of Fair Value in our country. Part VII is conclusion, it concluded thewhole article.This article believed that when Present Value is used in Fair Value， theassumption of cash flow estimation, discounting rate determination and risk reflectionshould be more based on market condition. This article discussed the specific methods of Present Value and considered that Expected Cash Flow Discounting Technique ismore suits for Fair Value Measurement. This article made a systematic summarize ofthe latest international Present Value Measurement theory and methods, layering thePresent Value Measurement methods since the year of2000. This article has aimportant role in promoting the application of Present Value in Fair Value in ourcountry.