Incremental Value-Relevance Of Fair Value Measurement

Over the years, the fair value is a controversial topic in the academic community. Foreign scholars have focused on the studies on the value-relevance of the fair value, and their conclusions are inconsistent. CAS has been relatively cautious on the application of fair value. Convergence with International Accounting Standards, the Chinese new accounting standards is issued in 2006, where a highlight is the extensive application of fair value. Before and after the implementation of the new standards, domestic scholars studied much on the theory of the fair value, but little on the value-relevance of the fair value. The original intention of the re-introduction of fair value is to increase the value relevance of accounting information, but is this supported by empirical data?Based on the literature review and the important theoretical basis of the fair value, this paper uses the data of Chinese A-share non-financial listed companies in 2007-2009 as samples, and studies the incremental-value of Changes in fair value and net changes in fair value of financial assets for sale, applying the Ohlson's price model. The results show that in the current financial statements mastered by historical cost measure, both the changes in fair value and the net changes in fair value of financial assets available for sale have incremental value-relevance. This paper not only provides theory and empirical support for standard-setting, but also helps investors understand accurately the information content based on the new standards.