Professor Qu Xiaohui from Xiamen University Accounting Development Research Center and team member Professor Zhang Guohua from Harbin University of Commerce Accounting Research Center/Xiamen University Accounting Development Research Center collaborated on the topic "Fair value measurement, Value Relevance and Economic Development: Adoption Evidence of China's listed Firms”, published in Asia-Pacific Journal of Accounting & Economics, Volume 29, No.4, 2022.
Fair value takes the market value or the present value of future cash flows as the main measurement attribute of assets and liabilities, and has become a widely concerned and applied accounting measurement attribute because of its high value correlation, and is the goal pursued by international accounting standard-setting institutions for initial confirmation measurement and subsequent reconfirmation measurement.
Because the confirmation and measurement of fair value are greatly influenced by market activity and subjective judgment of accountants, there is a problem of insufficient reliability compared with historical cost, so it has become a controversial topic in academic circles at home and abroad. The application of fair value accounting in China's accounting standards has also gone through the process of trial, stagnation and re-application. Different people have different opinions on the discussion of fair value in academic circles, but the test of the application effect of fair value in enterprises has not reached a consistent conclusion. There are also different opinions and practices in the adoption of fair value in different countries, especially in developing countries, where the market economy is not yet mature, and the source and reliability of fair value acquisition have become the main difficulties in the adoption of fair value.
The degree of marketization reflects the sensitivity of the market to changes in supply and demand forces. The more dynamic the market is, the more competitive the market is and the fairer the price is. In this paper, the degree of marketization is introduced into the influencing factors of fair value measurement to test the influence of different degrees of marketization on the choice of fair value measurement and its value correlation, and then infer the applicability of fair value in countries with different levels of marketization development.
China's fair value measurement has been widely used in the initial and subsequent measurement of financial assets and financial liabilities, and it has also been used in investment real estate. Compared with the mature financial market, the development of China's real estate market is not balanced, so it has become the most suitable scenario and the best sample source to test the influence of marketization level on the choice of fair value measurement and its value correlation.
Drawing lessons from Ohlson (1995) price model, this paper first tests the value relevance of the fair value of investment real estate of listed companies that use fair value to measure investment real estate, then introduces industry variables to further test whether there is any difference in the value relevance of fair value among industries, and finally introduces marketization index, which divides the sample companies into four categories according to their locations, and respectively tests the difference in the value relevance of financial reports after the sample companies in different marketization areas introduce fair value, and obtains relevant empirical evidence.
Empirical evidence shows that the level of economic development, the characteristics and scale of enterprises significantly affect the adoption of fair value measurement model and its value relevance. The research results show that it is premature to adopt the fair value measurement model completely in countries with immature market mechanism.
