ABSTRACT
Fair value accounting, which originated in mature market-based economies as a tool to provide better information that facilitates arm's length transactions, offers an interesting lens to observe the institutional factors that determine the outcomes of China's accounting reforms. This chapter discusses the evolution of fair value measurement in China Accounting Standards (CAS). CAS have been constantly changed by the government to facilitate the transition from a central planned economy to a market economy. Extant literature on fair value accounting in China has largely focused on examining the valuation and contracting usefulness of fair values provided by Chinese-listed companies and managerial manipulation of earnings through fair value estimates. The initial application of fair value measurement, however, did not achieve the objective of improving the transparency of financial reporting. One primary goal of adopting fair value accounting in China is to provide equity investors more transparent information for valuating a company.
