What is fair value? Fair value is also called fair market value and fair price. The price determined by familiar buyers and sellers under fair dealing conditions, or the transaction price at which an asset can be bought and sold between unrelated parties under fair dealing conditions. Under fair value measurement, assets and liabilities are measured at the amount that would voluntarily exchange assets or pay off debts between two parties familiar with the situation in an arm's length transaction. The purchasing enterprise's recording of the combined business requires the use of fair value information. In practice, an asset appraisal agency usually evaluates the net assets of the merged enterprise. Determination of the fair value of the net assets of the merged enterprise 1. Marketable securities are determined based on the current net realizable value;

2. Accounts receivable and notes receivable are based on the amount expected to be collected in the future, based on the current The value discounted at the actual interest rate is determined by deducting the estimated bad debt losses and collection costs;

3. Completed products and merchandise inventories are determined by the balance of the estimated selling price minus the realization expenses and reasonable profits;

4. Work-in-progress inventory shall be determined based on the estimated selling price of the completed product minus the costs, realization expenses and reasonable profits to be incurred until completion;

5 , Raw materials are determined according to the current replacement cost;

6. Fixed assets should be treated according to different situations: for fixed assets that can continue to be used, they are valued according to the current replacement cost of fixed assets with similar production capacity. Unless it is expected that the future use of these assets will produce a lower value for the purchasing enterprise; for fixed assets that will be sold, or held for a period of time (but not used) and then sold, they can be valued at net realizable value; for fixed assets that are temporarily used for a period of time, Fixed assets that are then sold shall be valued at net realizable value after confirming depreciation over the future use period;

7. Identifiable intangible assets such as patent rights, trademark rights, lease rights, and land use rights shall be valued according to the assessment Value valuation, goodwill is determined based on the difference between the investment cost of purchasing the enterprise and the recognized fair value;

8. Other assets, such as natural resources and long-term investments that cannot be listed and traded, are determined based on the appraised value;

9. Liabilities such as accounts payable, notes payable, and long-term loans are determined based on the amount to be paid in the future using the amount discounted at the current interest rate;

10. Contingencies and agreements Obligations, such as payments arising from unfavorable lease agreements, contractual constraints on the enterprise and upcoming fixed asset liquidation costs, etc., should be fully estimated and the present value of the expected payment amount discounted at the then actual interest rate. valuation.

As long as certain identifiable assets and liabilities belong to the merged enterprise, their fair value must be determined, such as the enterprise's research and development costs, action plan costs, development costs of a certain formula, etc. The significance of determining the fair value of the net assets of the merged enterprise 1. As the base price of the merged enterprise, it forms the basis for determining the performance value of both parties in the property rights transaction;

2. The fair value of the net assets and the book value of the net assets The difference between them is the appreciation or depreciation of the net assets of the merged enterprise; the difference between the investment cost of purchasing the 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 asset's beneficial period, so fair value is one of the important basis for determining the value of goodwill (see "Equity Method"). Although it is recorded at book value under the pooled equity method, fair value still has special significance for it, that is, fair value is still used as the basis for determining the number of shares payable in exchange for net assets to make the transaction more reasonable. The fair value measurement model of the new accounting standards and its impact 1. The fair value measurement of investment real estate and its impact The investment real estate specified in the "Accounting Standards for Business Enterprises No. 3 - Investment Real Estate" refers to the investment real estate that can be measured and sold separately Real estate held by enterprises to earn rent or capital appreciation, including leased buildings, land use rights that have been leased or held and prepared to be transferred after appreciation, etc. This standard provides two optional measurement models, the cost model and the fair value model, for an enterprise's investment real estate. Under the cost model, investment real estate is depreciated or amortized in accordance with the standards for fixed assets and intangible assets, and is subject to impairment testing at the end of the period to make corresponding impairment provisions; if there is conclusive evidence that its fair value can be continuously and reliably obtained Yes, enterprises can adopt the fair value measurement model.

The depreciation, impairment or amortization value of land use rights of investment real estate measured at fair value is directly reflected in changes in fair value, and affects corporate profits through "gains and losses from changes in fair value", without being separately accrued. Affected by this, in the context of the current continuous rise in real estate prices, commercial and real estate companies that own buildings for rent or hold land use rights to be appreciated will be favorably affected. However, the houses and buildings for sale owned by real estate development companies are accounted as the company's inventory, and their valuation basis still adopts the cost model and is not affected by the appreciation of fair value. Even if this type of enterprise resells the houses and buildings it holds to rent in order to apply the fair value measurement model, in the first year of implementation of the standard, the excess of its fair value over the book cost can only be adjusted to the shareholders' equity at the beginning of the period. without affecting the current year's profits. Therefore, there is no theoretical basis for predicting that the real estate industry will experience a large-scale performance increase in 2007 due to changes in new accounting standards. Of course, if the real estate market remains in a bull market during or after 2007, the benefits brought to the industry by the new accounting standards will gradually emerge.

2. Fair value measurement of financial instruments and their impact According to the "Accounting Standards for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments", financial instruments measured at fair value mainly include trading financial assets and Financial liabilities, such as stocks, bonds, funds, etc. purchased by enterprises from the secondary market in order to make full use of idle funds and earn price differences; another example is derivatives that are not used as effective hedging tools by enterprises, such as forward contracts, Futures contracts, swaps and options, etc. In addition, enterprises can directly designate certain financial assets or financial liabilities to be measured at fair value based on risk management needs or to eliminate inconsistencies in accounting recognition and measurement of financial assets or financial liabilities. The reported value of these financial instruments measured as fair value is the market value, and changes in the financial instruments are directly included in the current profit and loss. This also means that if a company can better grasp the market conditions and trends, its performance will improve as the "profit and loss from changes in fair value" increases; on the contrary, if the company's investment strategy is inconsistent with the market conditions, its current profits will be accordingly damaged. Therefore, the measurement attribute of fair value can be considered as a "double-edged sword", which is very different from the old standard's "lower-or-lower method" which only reports on worries but not on good news, which often results in the reported value of financial instruments being underestimated.

3. Fair value measurement of other businesses and its impact. According to incomplete statistics, in the new accounting standards system, at least 17 of the 38 specific standards that have been promulgated have used fair value to varying degrees. In terms of measurement attributes, in addition to the two items analyzed above, there are also transactions or matters such as non-monetary asset exchange, debt restructuring, and business mergers under non-contractual control that have a greater impact on the company. The reason why the new accounting standards adopt the fair value measurement model for these transactions or events is mainly due to the principle of substance over form. For example, for the exchange of non-monetary assets with commercial substance between enterprises, the use of fair value to measure the assets exchanged and exchanged in is essentially the recognition of the "sale" and "purchase" of the enterprise's non-monetary assets, and the "sale" of the enterprise's non-monetary assets. "The difference between the fair value and the book price of an asset is the income realized by the company. Under the old accounting standards, similar businesses can only be valued at book cost, and the difference between fair value and book value cannot be recognized as corporate profits and losses; similarly, if a company uses the fair value of non-monetary assets to pay off debts in debt restructuring, If the value is higher than its book value, the higher part, together with the debt forgiveness obtained, can increase the current profit; in a business merger not under the same control, the fair value of the assets paid and liabilities incurred or assumed by the buyer The difference between its book value and its book value is reflected in the company's current profit and loss. The adoption of the fair value measurement model in these transactions overcomes the shortcomings of underestimating the value of corporate assets due to the adoption of the cost pricing model, thereby more truly reflecting the corporate asset value and operating performance.