The Research On The Virtuality Of Fair Value

This paper, adopting primarily standardization research and secondarily case study, studies the characteristics and the enlargement effect on financial crisis of fair value in order to better use fair value. Firstly, the paper states the origin of fair value, analyzes the transaction base of fair value and points out the virtuality of fair value. By comparing fair value with market price, historical cost, current cost, current market value, net realizable value and current value, the paper illustrates that market value is the foundation of fair value and fair value is a new attribute independent from other measurement attributes. Meanwhile, the article analyzes the virtuality of fair value. Price universality and the otherness between holding gain or loss and realizable gain or loss are expatiated as two expressions of its virtuality. Moreover, by comparing different definitions and development tendency of fair value in the world, the paper points out the present "mixed" state of virtual features is a gradual change with the change of definition, which has deviated from its real contents. The paper also indicates the further regulating of fair value application is needed. Secondly, the article regards this financial crisis as the background and then elaborates the whole system of virtuality enlargement effect. This system is divided into three levels:microcosmic--virtuality of fair value; middlescopic--multiplier effect of fair value; macroscopic--cyclical effect of fair value. The three levels were discussed respectively and the extension of enlargement effect within the system is illustrated by case analysis and examples. Finally, the paper lists the measures to modify the fair value standards in the world in response to this financial crisis and the ways to effectively weaken or avoid enlargement effect.