Fair Value: A New Accounting Standard in China
[Abstract] This paper firstly gives the concept of fair value and its application environment, and then analyzes the fair value in the new standards specifically. Finally in combination with the concrete background in China, we put forward some advices on the carrying out of the fair value in the accounting practice.
[Key words] Fair Value; China new accounting standard
Since January 1, 2007, the China new accounting standards will become mandatory for listed Chinese enterprises. The adoption of the new China accounting standards system brings about substantial convergence between Chinese standards and International Financial Reporting Standards (IFRSs), as set by the International Accounting Standards Board (IASB). One of the most important introductions is the fair value measurement.
I、Fair Value and its application environment. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm 's length transaction. The imprecation of the Fair Value is limited to the market environment. 1、Active market 2、Fair trade If there is active market, which is as fair value generally considers input value reflects fair value for replacement cost. Consider the transaction value to reflect the current fair market value; if there are not active markets, and it’s not easy to find similar assets or similar asset’s active markets, the present value of future cash flow will be featured playing fair value.
II、Fair Value in the China new accounting standard
The new accounting standard system, Accounting Standards for Business Enterprises (ASBEs) consists of a new Basic Standard and 38 Specific Accounting Standards. Among these standards, there are 17 places which are connected with the Fair Value, and in these changes, Investment property, Business Combinations, Financial Instruments and Exchange of non-monetary assets are affected greatly.
1、Investment property Investment property is property (land
[Key words] Fair Value; China new accounting standard
Since January 1, 2007, the China new accounting standards will become mandatory for listed Chinese enterprises. The adoption of the new China accounting standards system brings about substantial convergence between Chinese standards and International Financial Reporting Standards (IFRSs), as set by the International Accounting Standards Board (IASB). One of the most important introductions is the fair value measurement.
I、Fair Value and its application environment. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm 's length transaction. The imprecation of the Fair Value is limited to the market environment. 1、Active market 2、Fair trade If there is active market, which is as fair value generally considers input value reflects fair value for replacement cost. Consider the transaction value to reflect the current fair market value; if there are not active markets, and it’s not easy to find similar assets or similar asset’s active markets, the present value of future cash flow will be featured playing fair value.
II、Fair Value in the China new accounting standard
The new accounting standard system, Accounting Standards for Business Enterprises (ASBEs) consists of a new Basic Standard and 38 Specific Accounting Standards. Among these standards, there are 17 places which are connected with the Fair Value, and in these changes, Investment property, Business Combinations, Financial Instruments and Exchange of non-monetary assets are affected greatly.
1、Investment property Investment property is property (land
References: [1] International Accounting Standards Guide，David Alexander, etc，citic publishing house，2004 Edition [2]《企业会计准则2006》，中国经济出版社 Accounting Standards for Business Enterprises 2006, Chinese Economy publisher. (In Chinese) [3]《公允价值》，谢诗芬著 ，湖南人民出版社，2004年02月01日 Fair Value, Xie Shifen, Hunan people publisher, 1 Feb, 2004（In Chinese）