Deloitte views on European Commission’s Green Paper concerning long-term financing
26 Jun, 2013
Deloitte Touche Tohmatsu Limited’s European Economic Area member firms have submitted a letter of comment to the European Commission (EC) concerning its Green Paper, ‘Long-term financing of the European economy’. The comment letter provides Deloitte’s perspective to questions concerning the role of banks, cumulative impacts of prudential reforms on long-term investments, fair value accounting principles, and the integration of financial and non-financial information.
Regarding fair value accounting principles, we believe that "it would be inappropriate to say that it is fair value accounting that leads to short-termism in investor behaviour. No evidence has been provided so far for such a statement. This would also suggest that, in the absence of fair value accounting, investors would necessarily adopt a long term view. [...] It would be more appropriate to consider that fair value accounting may contribute, albeit to a limited degree only, to short-termism in investor behaviour."
As a response to this, we believe the following elements should be considered when fair value is used in the measurement of assets and liabilities on the balance sheet, in the measurement of performance, or as supplemental information in the notes to the financial statements:
- the role of the business model;
- alternative measures to fair value; and
- ensuring that the information delivered does not create further uncertainty.
Click for a full summary and access to the comment letter.
