ABSTRACT

This chapter examines the extent of fair value accounting (FVA) adoption in the new Chinese Enterprise Accounting Standards (CEAS), issued in 2006, and its implementation in practice in China's listed firms. The first adoption of FVA in China can be traced back to 1998, when the Enterprise Accounting Standard – Debt Restructurings was released by the Ministry of Finance (MoF). Based on the regulatory framework of FVA in China and hand-collected data from Chinese listed nonfinancial firms, the chapter first reports the extent of China's implementation of FVA in practice, including initial and subsequent measurement, impairment tests, and disclosure. The implementation of conditionally mandatory FV requirements in initial measurement only involves CEAS 7. Mandatory FV requirements for subsequent measurement are prescribed in CEAS 10 (Enterprise Annuity Fund) and CEAS 11 (Share-Based Payment). Therefore, the professionalism and independence of external asset appraisers and independent auditors are crucial to maintain the high quality of FV information.