The Value Relevance Of Investment Properties Measured In Fair Value

As being one of the targets in accounting, Decision usefulness plays a more andmore important role. On February15,2006, the ministry of finance issued newaccounting standards for enterprises, which promoting the applying of fair valuemeasurement model in listed companies in our country. Since the new guidelinescoming into practice, the debate on the application of the fair value has never beenstopping between academia and practical circle. In the new accounting standards forbusiness enterprises, the requirement of using fair value measurement directly orindirectly for related assets and liabilities has reach up to35items. Then, in order tofurther speed up the international convergence of accounting standards, in April2010,the ministry of finance had issued the accounting standards for enterprises continuedconvergence road map. On January26,2014, the ministry of finance issued the No.39accounting standards for enterprises (fair value measurement), which indicating that theimplementation of fair value measurement in our country is the trend of The Times. Thelisted companies in our country will fair value measurement model more and morespecific, and the disclosure of the fair value measurement will become more and more.The No.3accounting standards for enterprises published by the ministry of financefor enterprises ruled that the listed companies could use fair value methods formeasuring investment properties if they meet certain conditions. In other words, thatonly when the fair value can be obtained continuously and reliably, enterprises can usefair value measurement model. Investment properties have been existed in manyeconomic organizations before the new accounting standards have been come intopractice. Hence it is not a new item. And the application of fair value measurement willbetter regulate the accounting treatment of investment properties. And help investors toevaluate the financial reports, and then make the right investment decisions.This article examines the value relevance of investment properties measured byfair value after the use of CAS3. The research shows that the implementation of fair value measurement model in investment properties is helpful to improve the quality ofaccounting information and help investors to make correct investment decisions.First, for the companies who have investment properties, if the investmentproperties are measured by fair value measurement model will improve the valuerelevance of accounting information. The larger is the company size, the possibility anddegree of market manipulation is relatively small, more conducive for the company todisclose more specific information, which is helpful for investors to evaluate stock price.Asset-liability ratio index has significant influences the value relevance of investmentproperties measured by fair value. The higher the company’s return on equity is, thehigher its value relevance.Secondly, this paper investigated the impact on fair value of investment propertiesof the analyst attention, the shareholding of first big shareholder, the second to the tenthlargest shareholders’ ownership concentration and corporate government.In particular, for the companies who have investment properties, if they are caredby the analysts, the accounting information is more relevant. Analyst attention willimprove the value relevance of the investment properties measured by fair value. Thehigher the proportion of the first big shareholder holds, the lower the value relevanceof accounting information. The phenomenon that one shareholder hold more sharesthan others will weaken the investor’s ability to use fair value information. The higherthe second to the tenth largest shareholder ownership concentration, the higher thevalue relevance of accounting information, it shows that the second to the tenth largestshareholders can effectively balance the phenomenon of “the single-large shareholder”,and improve the value relevance of fair value information. Institutional investorsholding more shares, the value relevance of accounting information is higher, it showsthat institutional investors help to make the company’s ownership structure morereasonable, and can effectively improve the value relevance of the investmentproperties measured by fair value.