Considerations on Fair Value Measurement Originated from Sub-Prime Mortgage Crisis

The American sub-prime mortgage crisis has initiated an important accounting question, that is fair value measurement is accused. This paper makes a theory root analysis of fair value measurement, which thinks that fair value enlarged crisis's conduction, intensified fluctuation of bank profits and losses, has reflected the financial risk excessively; at the same time it considers that fair value played a positive role in the sub-prime crisis. This paper puts forward that we should distinguish between profit and comprehensive income and improve valuation technology, valuation method in order to improve fair value measurement, as well as ought to strengthen information disclosure of fair value. Conclusions are: fair value is not only a practical measurement attributes to measure financial instruments and its derivatives, and fair value measurement is but also the only measuring method to financial instruments and its derivatives at present and future. But we should perfect valuation model and valuation method of fair value in order to guard against and defuse financial risks.