Research On The Relationship Of Fair Value And Earnings Management

Since the introduction of new accounting standards, the dispute of fair value has never been stopped. The global financial crisis in 2008 pushed the fair value problem to a new peak. Public awareness and judgments on the fair value are different. Earnings management has been a hot issue, it frequently occurs, can't be eliminated. The research of fair value becomes increasingly important, and earnings management is also necessary for the healthy development of market economy. In financial crisis, each big investment bank existed earnings management behavior,the fair value was controversial. Study on the relationship between fair value and earnings management is essential for correct understanding of them.Firstly, based on the comprehensive income theory, the paper analyses the relation between the fair value and the earnings management, pointing out that the fair value can fundamentally regulate the earnings management effectively. Secondly, from the angle of some time factors about accounting periods and accrual basis, the thesis explains that the fair value can make up for accounting period and accrual basis, and is conducive to earnings management regulation. Thirdly, the thesis also points out that the fair value in practice will inevitably be a tool for earnings management from the space factors such as accounting principles, accounting methods, accounting estimates. Fourth, focus on using game model, combining with the sub-prime crisis, it argues that games by the parties influence the right application of the fair value and earnings management, and indicates that fair value will eventually be developed and earnings management will be regulated.Finally, from the point of fair value, enterprise, investor, and the regulator, it makes some proposals for the improvement of the fair value and regulation on earnings management. On the construction of fair value accounting, the author boldly proposes a reasonable fair value measurement standard. By optimizing the financial tools and other assets varieties, we are able to improve the quality of accounting information and regulate the earnings management. In order to strengthen supervision of the regulator, the author advocates an increase of the punishment intensity and probability, in which the importance lies in raising punishment probability.