Fair Value Of Theoretical Research And Its Impact On The Financial Statements

On Feb. 15^th, 2006, the Ministry of Finance promulgated the new Accounting Standard, of which fair value measurement is implemented in several areas including financial instruments and investing real estate. The most important information media between listed companies and investors or even among themselves in the capital market is the financial report. With the establishment of capital market as well as the separation of ownership and operation, the requirement of eliminating the asymmetry of information becomes increasingly urgent, and accounting standard is one of the crucial systems. How will fair value infect the financial system? And what is the coming obstacle for further use of FV in our immature economy. Based on this issue, the author carries out research, hoping to give some constructive advices.The first part is the summary of referential documents, which starts with the ten theoretical foundations and recognizing methods. Then author reviews several areas FV is implemented and the impact on listed companies. At last, the author gives advice about regulating and smoothing its use of FV in China.The second chapter also begins with the theory about FV, the difference against before is to emphasis the relationship between FV and the other four measurements, indicating its superiority in reflecting the value of financial instruments, etc. In following sections, the author recalls the history of FV ever used in China and the reason of reusing it in accounting standard.The third and forth Chapters are crucial. Firstly, the author summarizes how FV is used in accounting standard and points out its influence on individual accounting elements. In the second section, the impact on B/L, I/S, Financial ratios and the quality of accounting information is particularly analyzed. Aiming to clear up both the positive and negative consequence it brings, help the statements users to better understand the essence of change.In the last chapter, the author diagnoses reasons behind the difficulties in implementing FV in China, including the economic environment, cost, present value technology, information users' analyzing capability and regulation as well as gives advice about the solutions.