EFRAG feedback statement on the results of the roundtable on financial reporting for long-term investing business models
30 Aug, 2013
On 8 July 2013, the European Financial Reporting Advisory Group (EFRAG) held a roundtable meeting in Brussels to facilitate a discussion with European constituents regarding the financial reporting aspects of long-term investing business models and financial reporting issues raised in the EC Green Paper on the long-term financing, more particularly on the use of fair value accounting for long-term investments.
The event was part of EFRAG’s public consultation connecting the European Commission green paper and the limited scope amendments to IFRS 9 Financial Instruments proposed by the IASB that indicate that fair value measurement and long-term horizons are not mutually exclusive.
The part of discussions regarding the question of whether fair value measurement leads to short-termism revealed that the users of financial statements believe that fair value information is important to understand a company's exposure to financial market risks and is a good indication of the liquidity of the market. A user panellist also pointed out that there was no academic evidence that fair value was leading to short-termism.
The panellists from the insurance and banking industry noted they would prefer that fair value did not impact the profit and loss account when the business model is long-term investing. They stressed that volatility due to short-term variations does not provide information on real performance and should be communicated through appropriate disclosures. They also expressed concern regarding the amount of non-GAAP measures companies feel compelled to use to present a long-term investing business model in a way that is understandable to users.
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