Risk Prevention Of Fair Value Measurement In Investment Decision

With the development of global economy, cross-industry investment and acquisitions call for high request of the confirmation of target value. At the same time, the price of financial products faced to much more challenges as the emergence of a large number of innovative financial derivative instruments. In this situation, the historical cost measurement method, the dominant method in the financial accounting system, is facing great challenges. The limitations of this method is considered affecting the authenticity and information of assets and debt which cannot reflect the real economy essential, so we must use the more advanced methods to replace it.The emergence of fair value makes up the shortcomings of the historical cost method. It can provide the measurement of the enterprise value before, during and after the event, so more information and risk will be disclosed, in accordance with the decision-making. More importantly, the fair value is a future-oriented measurement methods which covers a range of factors including time value, potential gains, unknown risks etc. View from the evolution of the definition of fair value and the extent of regulation of the Terms of Use, fair value is the vigorously promoting measurement in the economic globalization and Western relatively perfect market conditions provide a good environment for the use of fair value. However, the verification and periodic of the fair value hinders the widely use. The complexity and subjectivity of the measurement also caused many potential risks. There is no clear conclusion about its pros and cons so far. There are twists and turns during the process of China’s fair value use, from the misuse to avoid and then to gradually standardize. It is undeniable that China does not make detailed preparations to use fair value.Firstly, This paper compares the various definitions of accounting standards on fair value, reviews the history of the development of fair value measurement, introduces the main theoretical basis, summarizes the present research both at home and abroad, and systematically combs the evolution of the fair value to represent the general trend of fair value using. Secondly, describes the measurement attributes of fair value and pointes out that China’s accounting standards of fair value is a new measurement attributes. Then analyses the links and differences of other measurement attributes to illustrate the advanced nature of fair value. Through introducing the application of Fair value measurement in different accounting standards to show that the fair value measurement has detailed guidance in theory and specific ways in operation. Thirdly, analyze the risk of the fair value measurement in investment decision and point out the preventive measures in order to explain the weakness of fair value and the means of redress. Finally, through real cases to illustrate the actual risk in the investment decision-making practice and clarify the preventive measures and measurement methods. This can show the authenticity and universality of measurement of risk and verify the applicability of the relevant preventive measures.This paper researches and analyzes on the fair value measurement in risk investment decision by theory and cases on the basis of theoretical research, pointing out the risk and putting forward the methods to deal with the risks in order to help Chinese enterprises to avoid the risk of fair value measurement in the investment decision-making process.