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Thinking the use of the fair value of listed companies in China

Author: NiHuaFeng From: www.yourpaper.net Posted: 2009-12-26 21:32:03 Read:
[Abstract] The biggest change in the implementation of the new accounting standards for listed companies from January 1, 2007 is widely introduced fair value measurement attributes, and give enterprises greater autonomy to adjust its accounting policies. Formally promulgated on February 15, 2006, new accounting standards related to fair value, introduce new standards in the nature and definition of fair value and its use in our country, as well as new guidelines for fair value measurement in Application of listed companies in China.
[Keywords]
new accounting standards, the fair value of listed companies in the fair value measurement of financial instruments

First, the new standards in the fair value

Fair value concept
The fair value of an asset or liability in a voluntary between the two sides in the current transaction, not a forced or liquidation sales reached buy, sell, or the amount of the settlement. Under normal circumstances, the most in line with the definition of fair value is the amount determined by the market, market prices can be observed. However, the definition of fair value is actually a very broad scope of the concept, you can say that it is a basis for the establishment of other attributes, that is needed to reflect the transactions and events included fairness, adequacy of the price, and the same time both reliable, relevant Information Quality. Therefore, in the strict sense of fair value can not be compared with other measurement attributes as a separate one property and not suitable as a workable properties due to its abstract nature, can only be an ideal impossible to achieve the value of the concept. This is the consensus, the price of all market participants to take full account of the future cash flows of an asset or liability and its uncertainty risk, if there is no evidence to the contrary that the transaction is unfair or non-out in the voluntary market transaction price shall be the fair value of the assets or liabilities.
Measured at the fair value of the property reflects the present value, but not all measured at the present value of the property as a fair value. The fair value of the nature of the evaluation of a market-based information, the identification of the market rather than the other main value of the assets or liabilities. Our original accounting standards accounting elements measured at historical cost method based on the general practices of listed companies' financial fraud, in accordance with the accounting requirements of the principle of prudence, many implement the book value and the fair value of the lower-denominated assets at the end of the accounting period , when the end of the period the asset is impaired, the provision for impairment of assets, the report assets measured at fair value. Conversely, when the value of the assets at the end of the period is higher than the actual cost, at the actual cost. It should be said that this accounting measurement on the curb listed companies inflated assets whitewash results of operations, financial frauds played a certain role. However, the statements can only reflect the depreciation of assets does not reflect the reality of asset appreciation also make it difficult to fairly reflect the financial position and operating results of the enterprise, the principle of prudence and principle leads to contradictions. The new guidelines expand the scope of the use of the fair value method, the objective reality of the appreciation of the underlying assets to be reflected in the accounting statements, who can be more objective statements read to understand the actual financial condition and operating results.
Fair value characteristics
The fair value has the following characteristics: First, the price of fair value is not based on the assets in the past transactions or events, nor assets to create the present value of the cash flows in the future, but the current trading; in the use of fair value accounting elements are measured, should ensure that the accounting elements determined by the amount can be made and can be measured reliably; Third, the parties to the transaction must be on a voluntary basis in a fair trade environment and familiar with the transaction. The three conditions constitute the fair value of the formation of the premise.

Second, the impact of the fair value of the listed companies' financial activities

In recent years, China's financial markets a variety of financial instruments, such as warrants its creation system, short-term financing bonds, asset-backed securities, the new brokerage set of financial products, such as bond forward transactions. The growing importance of its role in the financial enterprise with the introduction of a variety of financial and financial derivatives, how initial recognition and measurement, subsequent measurement, final valuation and impairment problem has become an unavoidable. As the financial and financial derivatives with short-term changes in the market value of properties, so other methods are measured using historical cost is not correctly reflect the market value, and can better reflect the market value measured at fair value. The new accounting standards on financial instruments at initial recognition and measurement, subsequent measurement, the final valuation, impairment are based on the fair value of the standard, and its essence is the requirements for trading and available-for-sale financial assets or liabilities at fair value measurement, the true financial condition and operating results of such enterprises can better reaction to the decision-making needs of users of accounting reports. With the market-oriented reforms of China's exchange rate and interest rates, exchange rates and interest rates will fluctuate within a certain range of freedom.
Measured at fair value, and will have far-reaching significance for the improvement and reform of the financial accounting model. However, with the continuous development of the economic situation and the gradual improvement of economic environment, the majority of Accounting Theory workers and practitioners who constantly explore, the fair value measurement theory is getting more sophisticated, widespread promotion of accounting is bound to be measured at fair value. The dominant measured at fair value in the accounting standards in China will increasingly obvious, to accelerate our guidelines and international norms comprehensive standards, promote the development of China's economic globalization.
Fair value measurement model for solvency analysis. Solvency is the ability to repay maturing debt, including short-term solvency and long-term solvency. Fair value measurement model proposed, the distribution of corporate cash, inventories and other current assets will change, current liabilities would change. Corporate solvency analysis, current ratio, quick ratio will change.
Fair value measurement model for the analysis of the operational capabilities. The operating capacity is used to measure the ability of corporate organizations, capacity and efficiency of the management and operation of specific assets, and also reflects the realization of corporate assets. Have a greater change in sales revenue is recognized at the time and the amount of the old criteria, in the calculation of the ratio, such as accounts receivable turnover ratio, current asset turnover will change.

Third, the fair value measurement of the performance of listed companies

New system of accounting standards that came into effect January 1, 2007, the real estate investment reference to the fair value measurement mode, clear the subsequent measurement of investment property and its information disclosure provisions of the investment property if there is conclusive evidence that its fair The value can be continuously and reliably achieved, should adopt the fair value model. Because of the current real estate boom market environment, investment properties are carried at historical cost, so under normal circumstances, the fair value of the investment property is higher than the cost price. Measured at fair value, with investment real estate business there will be a greater degree of enhance current net profit. This provision will affect most listed companies' financial reports for the real estate category, investment real estate premium listed companies will be fully reflected in the book. Original accounting standards, the profits of listed companies due to the appreciation of the investment in real estate is not included in the report, but the new accounting standards will be this one included in the statements. After the adoption of the new standards, the financial statements will be separate "investment real estate" project, once using the fair value model, no provision for depreciation or impairment ready this mode, the difference between the fair value and the original book value through profit or loss. New standards of real estate held for investment purposes, the provisions of the fair value model, the basic standards and international accounting standards, more convenient international investors horizontal comparison with the value of domestic and foreign enterprises. In addition, the transparency of the company's asset value to strengthen, conducive to the company's shares in the stock market on a more fair pricing, which is also conducive to the company to refinance all the convenience of access to capital markets. Measured at fair value can help companies better means of force to get the development of the capital market.
The new system of accounting standards is to introduce a comprehensive fair value measurement model will have a certain impact on listed companies related to the performance of the investment business.
For corporate shares held by the listed company, in accordance with the provisions of the "Accounting Standards for Enterprises", and generally do not put it identified as prone financial assets, but are classified as available-for-sale financial assets. Measurement of the asset class, the new accounting standard requires that the acquisition cost end of the period in accordance with the fair value measurement for the difference between the fair value and the book value of owners' equity. This means, then into the two cities have a large number of legal person shares of listed companies, the future is reflected in the performance of the current period, being currently being reflected in the owner's equity in accordance with the new accounting standards net assets will be a substantial increase in .
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