Study Of Correlation Between Fair Value Hierachy And Accounting Con Servatism Based On Hongkong Fianacial Market

Metrics of fair value and accounting conservatism has been the hot topic ofinternational accounting research recent years. Especially since the outbreak of thesubprime crisis in2008, fair value measurement issues have become the focus ofaccounting academia. Its role, positive or negative, on accounting conservatism offinancial reporting has aroused wide-spreading attention and debates in the industry.This thesis adopts a new perspective of fair value hierarchy and discusses the impactof fair value measurement on H shares and Red chips stocks during2008-2011.This thesis summarizes the theoretical basis of fair value, as well as its domesticand foreign applications and development. Generation of the fair value hierarchy,changes and applications are further analyzed. Subsequently, accountingconservatism is introduced in definition, classification, modeling, parameters andempirical evidence. The hypothesis is proposed based on literature study of fairvalue hierarchy, accounting conservatism and their correlativity. This study analyzedthe H shares and Red chips stocks during2008-2011with Basu’s model ofreturns-earnings relation. And here we report that:1) overall, the financial report ofthe H shares and red chips stocks has conditional soundness;2) the fair value exertedinfluence on accounting conservatism both in overall and individual inspections, andthe influence varied through the period. An additive relationship was observed inconsistence with the hierarchy of fair value. The correlation of fair value andaccounting conservatism did not necessarily compromise accounting conservatism.