Experts reject fair value only methods

by Gavin Hinks

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14 Jun 2010

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A majority of investors and analysts reject a simply fair value only model for valuing financial instruments, according to a survey by PwC.

The research found that most analysts and investors across Europe the US and the Asia Pacific prefer a mixed measurement method where instruments held to maturity for their income are valued at amortised cost and only those held for sale or trading are valued using fair value.

The poll questioned 62 experts with specialisms mostly in banking and insurance. Around one in ten were generalists. Around three quarters worked with equities while the rest were focused on fixed income.

PwC said there was also a consistent desire among those polled for improved disclosure of fair value information.

Those that prefer a mixed measurement method say it better reflect the reasons for holding on to an instrument.

Pauline Wallace, head of public policy at PwC said the results provided a useful barometer of thinking on the issue of fair value.

“Clearly there is a breadth of views held by the investment community but it is striking the extent to which there is a consistency rather than divergence in opinions across both geography and sectors.

Currently, the International Accounting Standards Board is supporting a mixed measurement model while standard setters in the US, FASB, have championed a fair value only method.

Read more:

Financial instruments looks like a "collision": Volker

US lobby fights fair value proposal

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