Research On The Application Of The Fair Value Measurement Of Financial Instruments

As the global economy is developing in a remarkable speed, the capital market is changing rapidly, and the financial instruments are becoming increasingly complex. In this case, financial statement users are in urgent need of information that can objectively reflect the real value of financial instruments. As financial instruments are often characterized by their high risk and high liquidity, they could not be perfectly measured at the historical cost. Traditional financial accounting framework is facing unprecedented challenges.The development of the fair value has brought a profound revolution to the measurement of financial instruments. It is widely accepted and valued by people because it serves better for the objectives of financial reporting and the relevance of accounting information, and thus meet the decision-making needs of financial statement users. For this reason, FASB, IASB and China have all introduced the fair value measurement to the financial instrument accounting standards. However, there still exit some problems and difficulties in the application of fair value measurement, and fair value has even once become the focus of debate since the global financial crisis. China has showed commendable prudence in the adoption of fair value measurement, and defined the scope of financial instruments to which fair value measurement should apply. Due to the imperfection of domestic capital market and insufficiency of corporate governance, fair value measurement practices among domestic public entities still shows some deficiencies and they need to be further developed and improved in the nearest future.This article discusses the mixed-attribute model, makes comparison of the application of fair value measurement between foreign accounting standards and Chinese standards, and analyzes the reason for China’s prudence in adoption of fair value measurement. At the end, the article analyzes the status and problems of fair value measurement practices in financial instruments accounting by conducting a research on all the listed banking and insurance companies in China, and put forward some suggestions.