The survey examines the attitudes of 242 professional investors (financial analysts, fund managers, institutional investors, and rating experts) from across Europe towards different measurement concepts. It was done in cooperation with the European Federation of Analysts Societies (EFFAS
). Here's a quick summary of the major findings:
- When asked to give a general opinion on financial accounting measurement concepts, the respondents, regardless of their background, favor the consistent application of fair value accounting for all assets and liabilities, rather than cost-based measurement.
- However, users seem to distinguish between marked-based fair values ('mark-to-market' measurements) and fair values that are determined using valuation techniques ('mark-to-model' measurements):
- For liquid and non-operating assets, investors consider mark-to-market fair value to be the most decision-useful measurement concept.
IAS Plus observation: This finding is consistent with the view expressed recently by the CFA Institute strongly supporting the broad use of fair value measurement for all financial instruments. See our 21 April 2008 Story.
- For non-liquid and operating assets, historical cost and market-based fair value are not regarded as being significantly different in respect to decision-usefulness. IAS Plus observation: This finding is somewhat at odds with the view of the CFA Institute in their 2007 Comprehensive Business Reporting Model: Financial Reporting for Investors, which concludes that 'fair value information is the most relevant information for financial decision making'... Our goal is for fair value to be the measurement attribute for assets and liabilities." See our 20 August 2007 Story.
- Mark-to-model fair values are regarded as significantly less decision-useful than both market-based fair values and historical cost measures for practically all asset and liability classes. Only for financial assets do respondents view mark-to-model measures as more decision-useful than historical cost values. IAS Plus observation: The CFA Institute states: "With respect to the measurement of fair value, we believe that managers should look first to the most objective sources of fair value, for example, observable prices for the same or similar assets or liabilities in liquid markets. In the absence of such market-determined measurements, managers must report the best estimate of fair value as determined by widely accepted and applied valuation methods and by using market-based inputs."
Click to download: