Study On The Influence Of Investment Property Measured At Fair Value On The Financial Situation And Stock Price

Investment property measured at fair value is very important for its value andeconomic substance to be reflected fairly and objectively, while also contributed to thefurther convergence of accounting standards in china with international accountingstandards. But investment property measured at fair value after the initial measurementmay cause potential impact on the company’s financial condition and stock price. Firstlythe concepts of both the fair value and its measurement attribute for investment propertyare given, and then the specific application and the impact of fair value measurement oninvestment property are discussed. To obtain the evidence from the impact and theimplementation effect of fair value accounting in the investment property, the financialdata in annual financial report are selected from the year2008to2010from the listedcompanies whose investment property measured at fair value. The influence of fair valuemodel used in investment property on financial situation and the market price of stockare analyzed with these samples. The financial situation is reflected from foure asepectsof earning capacity, solvency, operating capacity and growth ability.It is showed that investment property measuered at fair value have little effect onfinancial situation. On the other hand, when the investment properties were measured atfair value, it is showed that the value of the relevant information can be improved withthe model of fair value compared with historical cost model. Moreover, the per share netasset value of the correlation was significantly enhanced, while the stock incrementalexplanatory power of net assets have increased more significantly than the accountingearnings have. The findings provide evidences on the effects of the use of fair value oninvestment property among the listed companies and also provide supports for thestandard-setters in decision-making. According to above analysis, advices is given onhow to implement the fair value measurement model effectively. By improving thetheoretical system of fair value, strengthening cooperation with assessment agencies aswell as improving the regulatory mechanism, the application of the fair value ininvestment property will expectly be further improved.