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Content and context: “fair” values in China

Ferdinand Balfoort (School of Accounting and Commercial Law, Victoria University of Wellington, Wellington, New Zealand)
Rachel Francis Baskerville (School of Accounting and Commercial Law, Victoria University of Wellington, Wellington, New Zealand)
Rolf Uwe Fülbier (Lehrstuhl für Internationale Rechnungslegung, Universität Bayreuth, Bayreuth, Germany)

Accounting, Auditing & Accountability Journal

ISSN: 0951-3574

Article publication date: 20 February 2017




The evolution of International Financial Reporting Standards (IFRS) was nurtured by economists and accountants loyal to the philosophical basis of what is often referred to as “Western” market economies, being classical and neoclassical contracting theories. The purpose of this paper is to illustrate how a particular Asian cultural attribute (guānxì ) impacts on the efficacy of fair value measurement.


Using a literature review and research of studies of the adoption of IFRS in China, studies of both guānxì and fair value in Chinese accounting research, this study unbundles Williamson’s governance structure and contracting theory to examine how guānxì is positioned orthogonally to fair value (market-oriented valuation) principles for financial reporting. This is followed by a case study of the events surrounding the collapse of China Medical Technologies.


Guānxì is integral to Asian economies and economic transactions. Resulting conditions, characterised by relational contracting, may not meet the qualitative characteristics of neutrality and faithful representation in fair value measurement of assets and liabilities. The same may be true when insider or “trusted party transaction” values prevail for large ticket transactions among entities in any jurisdiction.

Research limitations/implications

Future research on the impact of guānxì may be constrained by its often hidden, and yet dynamic, character; and the varieties of its manifestations.


This study highlights how difficult it may be to achieve both comparability and relevance in the asset and liability recognition and measurement rules in Asian (and possibly also other) economies adopting accounting principles that are developed in a Western context.



The authors thank two anonymous referees for providing helpful comments. Furthermore, the authors acknowledge the contributions made by the participants at the European Accounting Association Conference in April 2013 in Paris. The authors benefited also from comments at a staff seminar at the Jyväskylä University, Finland, on September, 2014 and at the Open University, Milton Keynes, UK on November, 2014. The authors are also appreciative of comments provided by Gina Xu (Auckland University of Technology) and Eagle Zhang (University of Sydney), and editorial assistance from Huw Rhys and Greg Rowe.


Balfoort, F., Baskerville, R.F. and Fülbier, R.U. (2017), "Content and context: “fair” values in China", Accounting, Auditing & Accountability Journal, Vol. 30 No. 2, pp. 352-377.



Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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