Abstract
This article, author consider the fair value of financial instruments whether it is appropriate for economic development and the volatility of the stock market or not through investors’ financial statement analysis and to help the Managers, Investors and someone else understand about reasonable economic information in financial statements. Because, Use of fair Value method plays an important role in measurement of financial instruments and help entity can decrease risk financing. However, Vietnam entities have not applied fair value method yet to revalue financial assets. So value financial assets in financial statements are not exact. This problem impacts on Vietnam financial market for long time. This article shall consider the fair value and historical cost methods measure financial instruments on the stock market through economic transactions to find out the difference of value financial assets, when using two these method to revalue them. The usage of fair value measurement accounting is a necessary factor for the development of Vietnamese stock market. Currently, Vietnamese accounting is using a book method for financial instruments; besides that the fair value accounting has not been thoroughly applied by entities under the standards of international financial instruments accounting.
Highlights
When financial assets are transacted by firms, the value of financial assets will be varied from the market price
From the problems mentioned above, it shows that the fair value method is always appropriate and contains high reliability of financial information
The international standard system emphasizes that the fair value method should be applied for the hedge financial activities or revaluation of financial assets
Summary
When financial assets are transacted by firms, the value of financial assets will be varied from the market price. This ratio reflects the correct fluctuation level of security prices on the stock market at the time when financial statements are presented According to this method, the company made a provision appropriate for short-term investments without revaluation of fair value of securities on the stock market price. This made the stock inventory value of financial statements not change as a result of solution 2 (stock inventory value of solution 1 and the stock inventory value of solution 2 is equal to $22,000,000).
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