Abstract
With the development of market economy, accounting for rent-seeking has become the new research directions in the field of accounting. Under the background of international convergence and equivalent of accounting standards, introduction of fair value measurement also becomes a hot topic. In recent years, accounting rent-seeking behavior makes the use of fair value frequently, causing serious damage to the orderly and healthy operation of the market. Based on the accounting rent-seeking theory, the paper carries out the research on background, reason and pathway of rent-seeking behavior of the fair value, combined with fair value measurement attribute, and making specific countermeasures and suggestions to suppress rent-seeking of fair value in the accounting, to improve the quality of accounting information, to protect the interests of investors, as well as the stability of the market order.
Highlights
Rent-Seeking and Accounting Rent-SeekingEconomic rent is part of the category of political economy; it means that part of income that income of all elements minus part of income of the elements will not affect the total supply of factor income, which is equal to the difference between income of the elements and its opportunity cost
Background of the RentSeeking Behavior of the Fair ValueAccounting rent-seeking behavior exists mainly in the process of execution of accounting standards and accounting standards-setting
The new accounting standards issued by Ministry of Finance in February 15, 2006 reintroduce the fair value measurement attribute and give its definition: at fair value, in accordance with the arm’s length transaction, assets and liabilities are measured as the two sides familiar with the situation of the transaction will be voluntary to exchange assets or settle the amount of debts
Summary
Economic rent is part of the category of political economy; it means that part of income that income of all elements minus part of income of the elements will not affect the total supply of factor income, which is equal to the difference between income of the elements and its opportunity cost. Listed companies manipulate accounting data and inflate profits to get rent which is only the virtual rent reflected on the book; the real rent is based on the financing because of securities market regulation, which is the expectation to listed companies from investors on the capital market exceeding the value of its real part. Yan Min [3] (2004) defined the accounting rent-seeking: under the premise that the total wealth in the society and enterprise’s real performance level (that is, economic benefits) do not change, the transfer of wealth and the inappropriate allocation of resources by changing the accounting information (i.e. financial reporting earnings number) are unproductive profit-seeking activities which cause the harm to interest of other social stakeholders [2]
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