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1. Introduction
This study focuses on China's experience as an emerging economy that is adapting to fair value accounting (FVA) as part of its overall convergence with International Financial Reporting Standards (IFRS). The study's goal is to assess the feasibility and desirability of this major emerging economy adopting and implementing IFRS FVA. In pursuing this goal, the study contributes to two streams of research: one on the challenges from the adoption and implementation of FVA, and the other on the possibility and desirability of the International Accounting Standard Board's (IASB) convergence project.
The superiority of FVA over historical cost accounting (HCA) has been gaining broad-based acceptance among accounting professionals and standard setters (e.g. [5] Barth, 1994; [8] Barth et al. , 1995, [9] 1996; [60] Tweedie, 2006a; [32] IASB, 2006b; [16] Cherry, 2009; [48] Mosso, 2009). However, the theoretical basis supporting such acceptance assumes that FVA will be implemented in well-functioning capital markets and financial reporting environments (e.g. [3] Ball, 2006; [4] Barlev and Haddad, 2007; [51] Penman, 2007), and most empirical evidence supporting this acceptance uses data from developed economies (e.g. [18] Danbolt and Rees, 2008; [49] Niu and Xu, 2009; [57] So and Smith, 2009). There is little evidence and in-depth discussion on whether emerging economies are capable of adapting to FVA. This study contributes to filling this void.
The global convergence to IFRS has been one of the main objectives of the IASB since its establishment in 2001. Impressive progress has been made since 2001 on the convergence of national/regional accounting standards with IFRS. Nevertheless, more critical voices have been raised recently ([3] Ball, 2006; [27] Holthausen, 2009) regarding whether the full convergence of national accounting standards with IFRS is truly possible. Because FVA is an essential element of IFRS, it is necessary to ask whether national standards and practices on FVA have been converged with IFRS's FVA requirements. There is a lack of research in this area, and this study aims to provide evidence related to this question.
The study's research design is a case study approach, using China as the case of an emerging economy that has been attempting to converge its accounting standards to IFRS. China's experience is of particular interest for several reasons. First, China's accounting standard setters...