Study On The Value-Relevance Of Investment Property’s Fair Value

According to the provisions in the accounting standard of investment property, costmodel should be used in the subsequent measurement of investment property, and the fairvalue model should only be used when certain conditions are met, which is, to adjust thebook value in accordance with the fair value of the measurement object on the balancesheet date, and the difference should be recognized as profit or loss in the incomestatement. Theoretically, the special nature of the investment property make it moreapplicable to use the fair value model, which can continuously and dynamically reflectboth the market value of the measurement object and the comprehensive income.However, according to the market situation since the new standards have come into use,the cost model still dominate the subsequent measurement of investment real estate, andfew companies are using the fair value model. The study is an attempt to check whetherthe use of fair value model indeed enhanced decision-making ability of investors; andwhether the stock market made a significant reaction to the release of fair valueinformation of investment property.This article uses the method which unifies the standardized research and empiricalresearch. The standardized research mainly analyze the quality characteristics of the fairvalue, and hold the view that fair value information can be a combination of both therelevance and the reliability, thus imposes an influence in the process of investor’sdecision-making, thereby affecting the price in stock market. The empirical research isbased on this conclusion, in which the hypotheses are brought up. A-share listedcompany’s financial data and market data during2007and2010are used as the sample,and the Ohlson price model is used to carry out the regression analysis, in which therelationship between the sample companies’ stock prices and the accounting datadisclosed in the annual financial reports. The empirical results show that the relationshipbetween investment property’s fair value and the stock prices in A-share market isobvious, but the market did not make a significant response to changes in the amount ofinvestment property fair value through profit or loss. But this is mainly because that thefair value model is rarely applied in practice now, and the amounts have little effect onthe performance of listed companies. Therefore, the accounting information generated bythe fair value measurement of investment property is relevant to the value. The introduce of fair value in the subsequent measurement of investment property has certain practicalsignificance in China. Therefore, In the final part of this paper, the proposals are putforward to the standard application of fair value pattern.