The Economic Consequences Of Fair Value Measurement

With financial crisis sweeping the whole world,fair value,which was thought of a useful tool against financial risk,has become focus of various sectors.Stakeholders' opinion,although definitely different,reflects their own interests.Each side has excellent points to make,and genuinely believes what it is saying.Investors mostly state that fair value accounting serves to enhance the transparency of financial information provided to the public,and a suspension of fair value measurement would weaken investor confidence.Some financial institutions are busy lobbying for the suspension of fair value measurement,and assert that fair value measurement has accelerated the crisis.Standard-setting bodies,although enthusiastically protect the interest of investors,have no choice but balance between information neutrality and economic consequences under such high pressure.Intermediate bodies hold diverse opinions,but most of them support the use of fair value,indicating that fair value is more relevant.Meanwhile,voices from lots of Government Officials point out that suspending fair value is necessary and beneficial for the economic environment. Stakeholders' discrepant reactions reflect the economic consequences of fair value measurement.Broad discussions of fair value measurement call for deep thought.Why Stakeholders concern highly of fair value but hold discrepant opinion? What makes fair value measurement so confused? What are the consequences of fair value measurement for stakeholders? How to reform PRC GAPP where fair value measurement accounts for nearly 50 percents? How makers predict the economic consequences of fair value measurement? The paper points out the economic consequences of fair value measurement by analyzing the reactions of stakeholders and the impact of fair value measurement on financial reports.The paper uses normal research as main methods.At first,the paper introduces the definition,theoretical foundation and the application in accounting standards of fair value measurement.It also applies the concept of economic consequences. Through discussing different reactions of stakeholders,the paper analyzes key data, which is in connection with fair value measurement,of listed companies in quarterly report and Semi-annual report of 2008.Finally,the paper provides specific suggestions from the aspect of economic consequences.