Research On Qualitative Characteristics Of Useful Financial Information Based On Fair Value

On the basis of value and the concept of present value, fair-value accounting,featuring in facing risks, uncertainties, markets, the present as well as the future hasreplaced the accounting model of historical cost and becomes the main accountingmodel in21stcentury.The ’true and fair view’ is a classical concept in the history of internationalaccounting. As a modern representation of this classical concept, fair-valueaccounting develops rapidly and replaced terms of ’qualitative characteristics ofaccounting information’ which based on historical cost with terms of ’qualitativecharacteristics of useful financial information’ which abide by the substantivecharacteristics of fair value. In Chapter Three of SFAC8’Statements of FinancialAccounting Concepts’─’qualitative characteristics of useful financial information’which was published by American FASB in September,2010, FASB replaced’reliability’ which belongs to the terms of ’faithful representation’ with ’reliability’itself. This change made qualitative characteristics of useful financial informationaccord more with substantive characteristics of fair value.Fair-value accounting includes not only accurate measurement (level1inputsvalue hierarchy), but also inaccurate measurement (namely, accounting estimate,level2or3input value hierarchy). However, if we can conform with the principle of’free from error’ while according with qualitative characteristics like ’relevance’,’timeliness’ and ’verifiability’ etc. Actually, fair-value accounting has the qualitativecharacteristic as ’faithful representation’.Innovation of this paper lies in that the author analyzes the qualitativecharacteristics of ’faithful representation’ on the basis of fair value and its newest andessential connotation as ’free from error’; the author believes that the emergence ofthe concept of ’faithful representation’ reflects that: fair-value accounting possessesthe features of both relativity and faithful representation; in addition, this paper putsforward some basic principles and ideas concerning the construction of qualitativecharacteristics of useful financial information in China. This paper will be helpful inboth constructing the framework of financial reports in China and in applyingfair-value accounting effectively.