The Research On Decision Usefulness Of Fair Value Information Of Financial Statements

Using financial statements is the main way for market participants to get to knowcompanies and obtain information. High quality financial statements not only providereference for investment decision-making, but also play a significant role in effectiveoperation of the social economy. Why financial statements have those functions? Themost possible reason maybe is those accounting information can affect thedecision-making behavior of investors. Decision usefulness of financial statementscan be divided into two frameworks: information perspective and measurementperspective. The major difference of the two perspectives is measurement attributes.Information perspective is based on historical cost, while measurement perspectiveadvocate use fair value for better correlation. Along with the development of thefinancial market, therefore, fair value has become an increasingly widespread use.Chinese accounting standard published in2006also reintroduced fair value (whichwas abandoned) in some principles. It is worth noting that this time the new standardnot merely take fair value as a basic measurement attribute, but also widen the scopeof application. Under this circumstance, the decision usefulness of fair valueinformation of financial statements became a worthy topic to discuss.This paper primarily review literatures about ways of financial statements andquality characteristics of information in fair value, then analyze the decisionusefulness of information in fair value from the standpoint of measurement attributesand information quality characteristics separately. In the empirical part, after analyzessome literatures from internal and external in value-relevance, this paper take thefinancial listed companies of the A stock market from2008to2010as samples andchoose items in fair value of financial statements, then check the value-relevance ofeach item by using price model. It is found that information in fair value disclosure byfinancial statements generally displays value-relevance. In detail, both items in fairvalue from balance sheet and chart of cash flow have strong explanatory capacity,nevertheless, the item-profits and losses on the changes in fair value from the profitstatement do not show significant value-relevance.