Research On Fair Value Application Of Our Country From The Perspective Of Financial Statement Analysis

The research and application of fair value was started early in foreigncountries. The quality of fair value standards formulated by IASB and FASB islarge. In our country, fair value proposed firstly in1998, abolished in2000wasagain been inducted in our country’s Accounting Standards for BusinessEnterprises in2006, and the new Standards basically achieved with theinternational convergence. The fact that the reliability of fair value wasoppugned after the financial crisis in2008made fair value the boiling points ofresearch and discussion. The program of reforming of fair value standards wasexecuted by FASB and IASB. The standards of fair value need to bereformulated because of the limitations on fair value.In this paper, we make a study on financial companies’ annual report toinvest the impact which the application of fair value makes to the financialcompanies’ financial standing and operating performance. And the conclusionsare as follows:Firstly, the application of fair value in domestic financial company iscautious. In2007, the impact of fair value made to financial companies waspositive, and in2008, the application of fair value debased the economicbenefit due to the financial crisis, but in2009, the negative influencedecreased largely. The ratio of assets measured by fair value and total assetsof banks is the smallest, so the influence on fair value of banks is the smallest,and the influence on securities companies and trust and investmentcompanies take second place, insurance companies suffer the biggest impact.Secondly, due to the using of fair value accounting, the profits and losseson the changes in fair value and asset value impairment, which aroused by fairvalue influence, cut down the profit before tax, and the bank’s operatingperformance and financial standing are worse. In addition, the more assetsmeasured by fair value the financial company hold, the bigger impact arousedby the influence of fair value the company will suffer.The application and the standards of fair value need to be improved. Firstly,the heavy market needs to be taken into account when the fair value standardswere reformed. Secondly, accounting practice of fair value needs guides whichare more detailed and more applied. Thirdly, the disclosure of fair valuemessage should be accorded and regulated. Fourthly, accountants shouldattend more job training and continuing professional education. Fifthly, internalcontrols of fair value should be constituted completely.