The definition of fair value is: "In a fair transaction,
The amount of assets exchange or debt settlement voluntarily carried out by both parties familiar with the situation. IASB International Accounting Standards Board defines fair value as "the amount that two familiar and willing parties can exchange one asset or settle another liability in a fair transaction". "China's definition of fair value is basically consistent with IASB.
This also reflects the convergence of China accounting standards and international financial reporting standards. The guiding ideology of the concept of fair value is to demand truth and fairness. The biggest feature of fair value is that it comes from a fair market.
It is the understanding reached by rational parties involved in market transactions after fully considering market information.
The market transaction price after this understanding is fair value.
2. Advantages of fair value measurement
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1)
Fair value measurement attributes can meet the decision-making needs of information users.
Fair value can reasonably reflect the financial situation of an enterprise,
So as to improve the relevance of financial information. Can objectively reflect the fair value of enterprise economic essence,
Can accurately disclose the cash flow obtained by enterprises,
So as to more accurately reflect the business ability of enterprises,
Solvency and financial risks,
Fair value measurement model is favored by investors, creditors and enterprise managers because of its high decision-making relevance.
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2)
Fair value measurement attributes can truly reflect the operating results of enterprises.
The calculation of enterprise profit is carried out through the ratio of income to related costs and expenses.
Income is calculated at current prices,
And costs and expenses are measured by historical cost. Therefore, the price difference caused by different measurement attributes of income and expenses,
It is not conducive to the correct evaluation of enterprise operating results, and it is more scientific and reasonable to use fair value measurement attributes for income, cost and expenses.
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3)
Fair value measurement attributes conform to the matching principle.
The matching principle usually refers to the matching of income with related costs and expenses.
If the historical cost method is adopted,
Income is calculated at current prices,
Expenses are measured at historical cost,
Due to the differences in measurement attributes,
Does not meet the requirements of accounting information matching principle. In order to make accounting conform to the matching principle,
Improve the quality of accounting information,
Accounting requires fair value measurement,
It can better reflect the requirements of accounting principles such as relevance and robustness.