The significance of fair value in the merged enterprise

1. As the acceptable reserve price of the merged enterprise, it forms the basis for determining the transaction price of both parties to the property right transaction;

2. The difference between the fair value of net assets and the book value of net assets is the appreciation or depreciation of the net assets of the merged enterprise; The difference between the investment cost of the purchasing enterprise and the fair value of the net assets of the merged enterprise is goodwill or negative goodwill (see "goodwill and negative goodwill"); Under the full equity method, the above difference must be amortized within the benefit period of the asset, so fair value is one of the important bases for determining the value of goodwill (see "equity method"). Although it is recorded at book value under the equity combination method, fair value still has special significance to it, that is, fair value is still used as the basis for determining the number of shares payable in exchange for net assets, so as to make the transaction more reasonable.

the impact of implementing the fair value model on related industries

the measurement impact

the investment real estate specified in the Accounting Standards for Business Enterprises No.3-Investment Real Estate refers to the real estate that can be separately measured and sold, and is held by enterprises to earn rent or capital appreciation, including rented buildings, land use rights that have been rented or held and are ready to be transferred after appreciation. This criterion provides two optional measurement modes for investment real estate of enterprises: cost mode and fair value mode. Under the cost model, the investment real estate is depreciated or amortized according to the standards of fixed assets and intangible assets, and the impairment test is carried out at the end of the period, and the corresponding impairment reserve is accrued; If there is conclusive evidence that its fair value can be obtained continuously and reliably, the enterprise can adopt the fair value measurement model. The depreciation, impairment or amortization value of investment real estate measured by fair value is directly reflected in the change of fair value, and will affect the profit of the enterprise through the gain and loss of fair value change, instead of being separately accrued. Affected by this, in the context of the continuous rise of real estate prices, commercial and real estate enterprises with buildings for rent or land use rights to be appreciated will be positively affected. However, the houses and buildings for sale owned by real estate development enterprises are accounted for as the inventory of enterprises, and their valuation basis still adopts the cost model, which is not affected by the appreciation of fair value. Even if such enterprises sell their houses and buildings for rent in order to apply the fair value measurement model, in the first year of the implementation of the standards, the part whose fair value exceeds the book cost can only adjust the shareholders' equity at the beginning, and will not affect the profits of that year. Therefore, there is no theoretical basis for predicting that the real estate industry will see a large-scale performance increase in 27 due to changes in the new accounting standards. Of course, if the real estate market remains bullish during or after 27, the benefits brought by the new accounting standards will gradually emerge.

financial instruments

according to the accounting standards for enterprises No.22-recognition and measurement of financial instruments, financial instruments measured at fair value mainly include transactional financial assets and financial liabilities, such as stocks, bonds and funds purchased from the secondary market for the purpose of making full use of idle funds and earning price differences; Another example is that enterprises are not used as derivatives of effective hedging instruments, such as forward contracts, futures contracts, swaps and options. In addition, enterprises can directly designate certain financial assets or financial liabilities to be measured at fair value based on the needs of risk management or to eliminate the inconsistency in accounting recognition and measurement of financial assets or financial liabilities. The reported value of these financial instruments classified as fair value measurement is the market value, and its changes are directly included in the current profit and loss. This also means that if the enterprise can better grasp the market conditions and trends, its performance will increase with the increase of fair value changes and profits and losses; On the contrary, if an enterprise's investment strategy is inconsistent with the market situation, its current profit will be damaged. Therefore, the measurement attribute of fair value can be regarded as a double-edged sword, which is very different from the lower method that the old standard only reports worries and does not report good news, so that the reported value of financial instruments is often underestimated.

Other businesses

According to incomplete statistics, in the new accounting standards system, at least 17 of the 38 specific standards that have been promulgated have used the fair value measurement attribute to varying degrees, and besides the two items that have been analyzed above, there are also transactions or events such as non-monetary asset exchange, debt restructuring and enterprise merger under non-common control. The reason why the new accounting standards adopt the fair value measurement model for these transactions or events is mainly due to the principle that substance is more important than form. For example, for the exchange of non-monetary assets between enterprises with commercial essence, the fair value measurement of the assets exchanged and exchanged is essentially to confirm the sale and purchase of non-monetary assets of enterprises, and the difference between the fair price and the book price of the sold assets is the income realized by enterprises. However, similar businesses can only be priced at book cost under the old accounting standards, and the difference between fair value and book value cannot be recognized as enterprise profits and losses; Similarly, if the fair value of non-monetary assets used by an enterprise to pay off debts in debt restructuring is higher than its book value, the higher part, together with the debt exemption obtained, can increase the current profit; In a business combination that is not under common control, the difference between the fair value of assets paid by the buyer and the book value of liabilities incurred or assumed by the buyer is reflected in the current profit and loss of the enterprise. The adoption of fair value measurement mode in these transactions overcomes the defect of underestimating the asset value of enterprises due to the adoption of cost valuation mode, so as to reflect the asset value and operating performance of enterprises more truly.

When using the value evaluation model to determine the fair value of financial goods, we should pay attention to the following matters:

(1) Use the value evaluation model carefully, and understand its theoretical assumptions, inherent limitations and what aspects are often used, especially which markets and financial products are often used;

(2) users should have knowledge of financial commodities, understand the characteristics of various financial commodities, market practices and the impact of changes in economic quantities such as interest rates and exchange rates on their prices or cash flows;

(3) Pay attention to the rationality of the use of the model. Risk management and other control management personnel should pay attention to whether the evaluation results of the model are consistent with the market, whether the model is outdated or updated, and whether there are other market information that can be used to adjust the model.