1. Fair Value Measurement Dr Liu Yuting Director-General Accounting Regulatory Department, Ministry of Finance, P.R.China 5 November 2009 Asian-Oceanian Standard-Setters Group (AOSSG) Discussion Paper for the First Meeting

2. 2 Contents The Fair Value Measurement project of the IASB The study by the FVM WG of the AOSSG Some specific topics The proposed FVM standard in China Next step proposed

3. 3 The Fair Value Measurement project of the IASB In September 2005, the IASB added a project in its active agenda to clarify the meaning of fair value and provide guidance for its application in IFRSs. In November 2006, the IASB published a discussion paper Fair Value Measurement, using Statement of Financial Accounting Standards No.157 (SFAS 157) Fair Value Measurement as a basis for forming its preliminary views. In October 2008, a IASB’s expert advisory panel on FVM issued a report Measuring and disclosing the fair value of financial instruments in markets that no longer active. In May 2009, the IASB published the exposure draft Fair Value Measurement (the ED) with a comment period ended on 28 September 2009. Roundtables in Norwalk, Tokyo and London in November and December.

4. 4 The study by the FVM WG of the AOSSG The Working Group on Fair Value Measurement of the AOSSG consists of the staffs from the following organizations, China Accounting Standards Committee (CASC) Accounting Standards Board of Japan (ASBJ) Korea Accounting Standards Board (KASB) Hong Kong Institute of Certified Public Accountants, Hong Kong SAR (HKICPA) Malaysian Accounting Standards Board (MASB)

5. 5 The study by the FVM WG of the AOSSG In early September, the CASC distributed the discussion points derived from the IASB ED to WG members for comments. Contributions by WG members included comments on the discussion points as well as their draft comment letters on the IASB ED. CASC staffs also analyzed comments on the IASB ED by other AOSSG members including standard-setters of Australia, New Zealand and Singapore.

6. 6 The study by the FVM WG of the AOSSG Based on inputs mentioned above ， CASC staffs prepared the agenda paper for deliberations at the first AOSSG meeting. Body of the paper – the body summarizes the WG project and analyzes views from WG members as well as other AOSSG members. Appendix I – the draft proposal expected to be discussed and approved at the first AOSSG meeting. The Inputs from WG members as well as from some other AOSSG members were incorporated into the draft proposal. Appendix II - WG Members’ responses to CASC's Discussion Points on FVM in September. Appendix III - Summary of Comments on the IASB ED from WG Members and other AOSSG members. The Comments on the IASB ED are from the IASB website. Appendix IV - Challenges the Emerging Market Economies May Encounter in the Application of Fair Value Measurement According to the Exposure Draft summarized by CASC staff. The CASC staff proposed submitting the appendix to the IASB for the deliberations on Emerging Market and Transitional Economies (ETEs) FVM Guidance as a input from the AOSSG, if the IASB decide to develop a guide for ETEs.

7. 7 Some specific topics Market in ETEs may be subject to higher volatility. In some scenarios, the quality of inputs based these markets is relatively low. The Shanghai composite stock index reached a record high point of 6124 on 16 October 2007, and fell to 1665 on 28 October 2008. The Dow Jones 500 index at these two dates stood at respectively 13992 and 8175. If the fair value can not be measured reliable, what shall we do ？ The cost exemption in FVM of financial instruments may be useful. How to apply FVM to non-financial assets? The scope of fair value accounting Guidance about using FVM in ETEs. More disclosures about the environments in which FVM is applied and inherent limitations of FVM.

8. 8 Some specific topics The definition proposed by the ED is, ‘the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.’ The premises of ‘In use’ and ’in exchange’ Highest and best use Market participants The most advantageous market VS the principal market

9. 9 Next step proposed We propose that the achievement of the WG shall be improved based on the results of the FVM roundtables before it is submitted to the IASB. The WG shall be maintained before the IASB standard is finalized. And the WG shall follow up any progress of the IASB project and update AOSSG members.

10. 10 Discussion