A Study On Fair Value Hierarchy Information And Accounting Conservatism

The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful in making decisions.Under the sole objective,fair value measurement basis has been applied from initial measurement to subsequent measurement,from off-statement disclosure to on-statement recognition,from financial instrument to some nonfinancial asset such as investment property.But there exit a lot of doubts about the procyclical effect,volatility and reliance of fair value.In this context,it is necessary to do further research about the information quality of fair value.A lot of researches show that conservatism is one important representation of financial reporting quality and accounting transparency,so the thesis will test the quality of fair value hierarchy information in the view of conservatism.In ever-changing economic environment,new transactions and new events emerge rapidly,creating explosive risk and uncertainties.In response to a large of uncertainties,regulators and practitioners take conservative accounting principle and polices seriously.However,conservatism is incompatible with neutrality conceptually,resulting in accounting standard setters’ different attitude to whether getting rid of conservatism.On the other hand,with the breakthrough and evolution of empirical measurement of conservatism,studies about the influence factor and economic consequence of conservatism become hot topic and important area in empirical accounting research.To sum up,the study on the relation of fair value hierarchy information and accounting conservatism has practical significance and theoretical value.This thesis consists of three aspects.First,the thesis tests management will improve conservatism out of opportunism or impair conservatism out of investor’ demand and contracts,litigation,tax and regulation consideration.Secondly,state owned enterprises(SOE)are faced with the question of insider control,soft budget constraint and government intervention and enjoy the benefit of political advantage compared to non-state owned enterprises.Based on the analysis,the thesis test whether SOE will impair conservatism when applying fair value.Thirdly,the thesis tests whether the financial enterprises will improve conservatism when applying fair value because of the prudential regulation.Accounting Standards for Business Enterprises No.39 requires reporting entities to disclose fair value hierarchy information,which provides data support and new research perspectives.The text tests the influence of flexible criteria and management judgment on accounting information quality based on the principle-agent theory.The sample include A-share listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2014,when Accounting Standards for Business Enterprises No.39 was enacted,to 2016,and it was found that: First,the bigger proportion asset and liability measured at fair value using Level 2 or 3 takes out of total asset,the lower conservatism comprehensive income presents.Secondly,caeteris paribus,SOE impair conservatism when applying fair value compared to non-SOE.Thirdly,caeteris paribus,financial enterprises improve conservatism when applying fair value compared to non-financial enterprises.