Does Hierarchical Disclosure Improve The Decision Usefulness Of Fair Value?

As an important aspect of the quality characteristics of accounting information,decision usefulness has been paid attention to by the international mainstream standards setting bodies.In recent years,the gradual increase of the decision usefulness based on the concept of measurement is evident.The proportion of fair value used in financial accounting is getting higher and higher.According to the relevant theory and practice,relying on the fair value measurement attribute,of course,will increase the relevance of accounting information,but also will reduce the reliability.Especially for the financial instruments in the non-active market,the fair value measurement has a large number of subjective factors,which provides the opportunity for the management to manipulate earnings.Therefore,the reliability of fair value measurement has been criticized and questioned for a long time.In the early twenty-first Century,the outbreak of a series of financial scandals,such as Enron,WorldCom,etc.,shook investors' confidence in fair value greatly.In order to cope with this situation,the Financial Accounting Standards Board(FASB)and the International Accounting Standards Board(IASB)has issued new guidelines for fair value measurement of SFAS 157 and IFRS 13.The main content of the guidelines is the introduction of fair value hierarchy theory,in order to provide more useful information for investors.Along with the increasing demand of the fair value in our country,in January 2014,the Ministry of Finance issued the "Accounting Standards for Enterprises No.39-Fair Value Measurement"(CAS 39),which realized the substantive convergence of the international fair value measurement standards.However,the market environment of our country is not perfect enough compared with the international mature market and we also lack relevant experience of the application of the fair value.In this case,it is necessary for us to test the effect of the implementation of CAS 39 in the current market environment of china.This paper selects listed companies in Shanghai and Shenzhen Stock Exchange in 2012-2015 as the research sample.Based on the theoretical analysis and empirical test,we draw the following conclusions:(1)Investors gave positive response to the implementation of the new guideline in China's capital market,which shows hierarchical disclosure enhanced investors' confidence in fair value;(2)The implementation of CAS 39 improved the value relevance of fair value assets,but didn't improve the value relevance of fair value liabilities.The reason may be that the proportion of fair value liability items is too small to make the stock price be sensitive to its change;(3)Specifically,for fair value assets,investors choose to believe in the first and second levels,don't trust the third level.And the value relevance of the first level fair value assets is not significantly higher than the level of the second;for the fair value of liabilities,the three levels are not related to stock price,which means,in a statistical point of view,investors do not make use of the information of fair value liabilities to make decisions.This paper shows that,in general,the implementation of the new standard can improve the decision usefulness of fair value and solve the problem lack of reliability.However,the usefulness of high-level fair value information is still lacking.Finally,according to the above conclusions,this paper puts forward some suggestions,such as,draw up more specific guidelines,increase the amount of information disclosure of the third level and encourage listed companies to cooperate with authoritative accounting evaluation institutions.