Fair value accounting based on value and present value concept, compatible with the historical cost accounting, accounting information not only to provide more relevant, and promote the concept of accounting elements to economics return in real terms. Fair value itself has the nature of the feature and the ability to express economic value accounting elements, has added extensions other than fair value in financial accounting conditions and room for other areas of Economics and management application. The point of this article to the theoretical basis of the fair value, discuss the need for the establishment of fair value measurement system in enterprise. The introduction of the fair value of financial and managerial accounting to be able to provide financial and other management information used to provide high quality information as a basis for decision-making and management.
Application of fair value and present value has become a major feature of contemporary international accounting reform, but also reflects the accounting development of objective law, represents the direction for the future development of financial accounting. Now more States and organizations promoting accounting and reporting using future cash flow values and fair value. Produced in the early 90 ‘s of positive accounting theory “measuring concept” think, reflected in the financial statements for submission to fair value decision usefulness of accounting information have increasingly become targets of accountants. Further, based on the fair value of its concept and property management of introducing the concept of fair value accounting and finance research, to provide managers with a more real, useful and relevant information, thereby enhancing management capacity within the enterprise.
First, fair value is market development trend
Although different States and organizations has own definitions to fair value but defined content is similar on. FASB in the seventh series financial accounting concepts using cash flow information in the notice, on the accounting measurement and present value (Using Cash Flow Information and Present Value in Accounting Measurements) to the concept of fair value is defined as “non-enforced or clearing transactions in the current, between the parties on a voluntary basis for assets (or liabilities) trade (or occur in connection with the settlement) prices”. In June 2004 in the enactment of the “fair value” in the draft guidelines, FASB renewed the concept of fair value, on the parties to increase “people familiar with the matter and non-associated” two qualifications. In recent years, the FASB has as most fair value accounting measurement objectives, including the initial confirmation of measurement during and after the new starting point of measurement. Visible, use of fair value in accounting practice towards expanding the scope, but it also increases the use of fair value measurement difficulties.
From the definition of fair value and analysis of current research results, concepts of fair value is actually a very wide area, on the one hand, in broad terms, fair value measurement properties can cover several other measurement attributes-the historical cost measurement, existing cost measurement, net realizable value of the current market price measurement, short-term measures and fair value for the purpose of the present value measurement (Xie Shifen, 2002). Fair values reflect fair, proper price in transactions and matters, while both reliable and related data quality, has become external stakeholders, especially most policymakers on accounting measurement attribute of inherent requirements. Therefore, the fair value measurement attribute information provided shall be used as all the quality characteristics of measured-is a fair expression of the value of the measurement object. On the, narrowly to told, fair value and can as independent of a measurement property can reflect simulation of market prices, is in has not been trading and non-liquidation of situation Xia, used various valuation technology on lack effective market of assets or liabilities project of value to approximate market pricing of way for assessment, to tried to get relative fair, and reasonable of price, reflect report due day the assets or liabilities project of static value.
Fair value accounting based on value and is now value concept, and compatible history cost accounting, due to its can provides-oriented now, and future, and market, and risk, in history cost measurement mainly of situation Xia was think is has uncertainty and cannot confirmed, and measurement of accounting information; compared with, history cost accounting mode to powers and responsibilities occurred system, and history cost principles for main features, provides of information more of is-oriented past, thus is increasingly does not adaptation economic environment of changes, also cannot meet information using who of demand. FASB, financial announcements, in the 7th highly recommended application of fair value, and put forward to the present value of future cash flows to estimate the fair value, especially when an asset or liability is not observable market price, but with a peace treaty is required or expected future cash flows, the present value of getting fair value measurement becomes important technical means.
Second, the fair value of the logical starting point
”Value” is the common logical starting point of the present value and fair value, are also important in economics and management of basic concepts. Fair value measurement to the economic concept of assets, proceeds and present value measurement requirements, accounting assets, gain important means of return concept elements to economics, so the fair value is the key to measuring value accounting model. In the definition of Economics, assets are based on enterprise use of these assets in the present value of future expected returns of the realization of metering, revenue is the enterprise in a period of changes in the net asset value – in essence, both built on the present and future-oriented, stress and economic decisions related to the economic “value” concept. So from an economic level, as a provider of value information value measurement is the responsibility of financial accounting, and the value of direct measurement is the present value of future cash flows. However, in present value measurement before the problem has not been fundamentally resolved, concepts of accounting income and assets have to build on past-oriented, stress measurement objective and reliable accounting “cost” concept. However gradually as economic conditions change because the information time and cannot complete reflects an enterprise value and increasingly subjected to community complaints. But, as FASB 7th series financial accounting concept notice in accounting measurement in the using cash flow information and is now value under promulgated and for fair value and is now value accounting research results of appears, for in initial confirmed or new starting point measurement Shi using future cash flow as accounting measurement Foundation, and and is now value measurement in accounting assessed contributions distribution in the of role provides has a comparison full of guidance framework, for fair value and is now value of application provides has technology support.
Third innovation, company financial perspectives: fair value and extend
Through the analysis of the concept of fair value, fair value should be and exist in the transaction, is a kind of trading – whether or not the transaction the object or its class is an active market. But, need clear of is fair value of fundamental features is “real and fair” (Xie Shifen, 2004), other features as: fair value measurement has fair sexual, is trading both equal bargaining of results; fair value measurement object has comprehensive, its measurement object not only including assets also including liabilities; fair value to exists of trading market has compatibility, not only including active market also including non-active market; fair value can reflect virtual of market prices, is trading and trading both can is assumes that of ; Fair value concept with dynamic properties; fair value measurement provides timely information fully, to market objectivity and comparability and can fully reflected management decision-making. Although as a fair value of financial accounting concepts arising from the transaction, but all these features and its “value” property or for the introduction of the fair value of Economics and management conditions and other related disciplines to provide a natural basis. In today’s economic environment, in many other disciplines in the field of management and economics, such as finance, insurance, actuarial, investment, asset assessment, credit rating, valuation, fair values are valued and used. Present value and fair value accounting has become important in many disciplines of Economics and management reform a prerequisite and guarantee, especially closely for financial accounting and management accounting and finance research, the introduction of fair value measurement concepts and methods of management accounting and financial management for the enterprise itself is of great significance.
(A) the fair value and finance research
The so-called financial goals, refers to the subject of finance in particular financial environment, through the Organization of financial activity and financial relationship between the objective to be achieved by. With the development of capital markets and mature, current shareholder wealth maximization has become the theoretical circle recognized enterprises financial goals-with the stock price represents a specific stakeholder value creation. Regardless of the theoretical debate over how to to finance research goals, it is always based on objective evaluation on the basis of enterprise value. Fundamental bond value is collaboration between financial and accounting and as economics and Management Branch, is certainly value are core concepts for modern finance, so correctly measurement and assessment to enterprise value and its components becomes finance research objectives to achieve basic premise. Apply the fair value and present value measurement to finance research, means that companies in the process of accounting treatment and offer accounting information in respect of the assets, liabilities and income are measured at the same time to be reflect the true value of information.
Some related literature in the had made, because enterprise of value is enterprise all assets (including accounting Shang has confirmed and is not confirmed of assets, as human resources and since invasive commercial reputation) common coordination role of results, therefore on Enterprise valuation never is will its all assets of value simple plus total so simple, this also decided has on those common produced cash flow of assets used existing market prices and variable is now net for measurement no more large of actual significance. From part of the whole and the sum does not equal the point of view, the above view is acceptable. It must be admitted that that the correct assessment of the value of an enterprise as a whole and reflect the need to establish in its component parts, that is, properly assess the value of the assets, liabilities and equity on the basis of, conversely, does not understand the value of various components of the overall real characteristic was not correctly understand the value of the overall situation. From another side, discounted cash flow method in the use of enterprise business value by using the present value of the theory and techniques, and generalized present value measurement of fair value accounting on a common theoretical base and technical methods, or you can evaluate the value of an enterprise as a whole as an extension of valuation of single asset items.
(Ii) the fair value and management accounting
Basic goal is to provide business executives for management accounting management accounting information required for decision making, it is called “internal report account”. Judging from its evolution and application status, management accounting as an integrated, interdisciplinary, business management, applied economics, in modern management accounting systems occupy a very important position, and has become an important part of enterprise decision support system. Compared financial accounting, modern management accounting focuses on future, to effectively help enterprises ‘ management authorities to correct management decisions require quantitative analysis of prediction-expected economic and scientific environment and business conditions change proposed various business scenarios for Enterprise options. Said management accounting has been “from traditional attention to financial-oriented decision analysis and budget control changed and emphasized shareholder value critical financial and business motivations of confirmation, measurement and numerous strategic management approaches, complex system” the (IFA,1998;IMA,1999), value management accounting management has become focus. Regardless what method and index measured and assessed value, inevitably involves value fair value accounting issues. There’s actually once again raised the issue of measurement of the value of, provides information for present value and future value calculation is not just on the leading position in the enterprise is qualified by the historical cost measurement system, so they must be involved in the present value and fair value accounting.
IV conclusions and prospects
As a new thing, concept of fair value reflects the emergence of the financial accounting and financial reporting in the future direction of the reform and development, promotes financial accounting to the economists from the past to promote cost measurement of measuring the value of the required changes. At the same time, fair value itself has the nature of the feature and the ability to express economic value accounting elements, has added extensions other than fair value in financial accounting conditions and room for other areas of Economics and management application. As a branch of management and economics, finance, managerial accounting and financial accounting by the “value” contact this core concept as a link to each other, the introduction of the fair value of financial and managerial accounting, external stakeholders can give organizations and enterprises to provide more authentic, useful and relevant information. Furthermore, taking into account on the basis of the principle of cost-effectiveness, within the enterprise to establish a viable system of fair value measurement, a company’s financial and other management information used to provide high quality information as a basis for decision-making and management, therefore, broaden the scope of use of fair value must have a significant effect on improving enterprise management ability.