Research On Fair Value Accounting In China In The New Era

With the continuous development of market economy and the deepening of capital markets, the real economy and virtual economy are becoming more closely. Thus, fair value has been the focus in the financial report. In order to make the financial report better to serve the user’s decision-making, the International Accounting Standard Board (hereinafter referred to as IASB) has been committed in promoting the internationalization and harmonization of fair value accounting. The financial crisis which broke out in2008made fair value in a swirl of controversy. IASB, however, didn’t stop implementing fair value accounting despite of its partial failure in the financial crisis and worked together with the Financial Accounting Standard Board (hereinafter referred to as FASB) to make intensive study on fair value accounting. On the basis of long-term research and practical experience, International Financial Report Standard No.13Fair Value Measurement (hereinafter referred to as IFRS13) was issued by IASB in May2011. IFRS13is a unified framework of fair value in the international accounting standard system. It unified and standardized the definition, measurement and disclosure of fair value. Moreover, IASB amended the fair value standard by IFRS13according to problems that presented in the financial crisis. The promulgation of IFRS13suggests that a new stage of fair value accounting in the international accounting standard system begins after the ups and downs caused by the financial crisis.The application of fair value in China experienced "in-out-in". Currently, the expansion of globalization made the global convergence of accounting standard an irreversible trend. Nowadays, China’s market economy is developing continuously and capital market is becoming maturer. Therefore, fair value, for China, will be the new challenge which must be faced with and solved properly in the new era. To this end, Ministry of Finance of the People’s Republic of China issued Fair Value Measurement (Draft) in June2012, indicating that China took a milestone step in the global convergence of accounting standard on fair value accounting.Compared with IFRS, however, China’s fair value accounting is still left behind, in the point of view both from unified framework and specific standards. Not only there is a lack of a unified framework for fair value, but also fair value is applied cautiously under some prerequisites in specific standards. In the present condition, on the one hand, China’s market economy is still in a developing period. For instance, the market economy is subject to more stringent regulation, the market system is not complete, the trading varieties are inadequate and part of the market is less active. On the other hand, due to the developing market economy, the market participants are less mature. In consequence, the valuation techniques are lagging behind. Difficulties in market and techniques greatly restricted the development of fair value accounting in China. On the way to achieve convergence with IFRS13, lots of challenges are bound to be faced with, not only while setting accounting standards, such as the building of unified framework and the application in specific standards, but also while implementing standards in respect of management capabilities, financial skills, external supervision and external audit. Faced with existing difficulties and challenges, a number of supporting measures based on China’s condition is in need. In the standard-setting aspect, we should develop China’s unified framework of fair value as soon as possible and improve the specific standards under the framework. In the standard-implementing aspect, we should perfect the market, upgrade management techniques, consolidate information disclosure and enhance external audit. These measures can promote the development of fair value in China, and lay a valid basis for realizing sustained global convergence of fair value accounting.Starting from the origin of fair value accounting, this article combs the development course of fair value in IAS/IFRS, U.S. GAAP and China Accounting Standard, conducts intensive comparative study on fair value application between IAS/IFRS and China Accounting Standard, analyzes the positive impacts that IFRS13brought to China, elaborates existing difficulties and challenges on the way to achieve global convergence of fair value accounting. At last, based on the current situation, this article makes recommendations on how to perfect fair value accounting in China.