A Study of Problems with Accounting Measurement Based on Fair Value

Fair value is an attribute most relevant to financial instruments;it is the only relevant measurement attribute for financial derivatives.The fact that fair value accounting must identify fair value changes(unrealized gains or losses) results in distortions of the achievements in business operations,investment and financial management of an enterprise.Confronted with a serious financial crisis,most financial assets lose their active markets,and fair value estimation of financial assets or liability loses its basis.It follows that an enterprise should stop using fair value to measure its financial assets and liability.This paper argues that the essence of financial accounting and financial statements exists in its ability to reflect the true economic situation of an enterprise and that accounting must never change into estimation.It is therefore suggested that our current system of fair value accounting be improved so that it meets the needs of new economic development.