Most investors would prefer a mixed
measurement model for accounting for financial instruments,
according to a global survey by PricewaterhouseCoopers (PwC).
The findings contradict reports from both the
US Financial Accounting Standards Board (FASB) and industry group
the CFA Institute that US investors favour full fair value
measurement for financial instruments.
The PwC study consisted of 62 in-depth
interviews with investment professionals. More than half of the
interviewees were from the US.
Most respondents favoured a mixed measurement
model with fair value reporting for shorter lived instruments and
amortised cost reporting for longer lived instruments, particularly
bank loans and deposits, when the company intends to hold those
instruments for the purpose of collecting the contractual cash
This view was consistent across all the
countries and industry sectors surveyed.
The respondents who favoured the mixed
measurement model said the information better reflects an entity’s
underlying business and economic reasons for holding an
They also stressed the importance of keeping
net income free from fair value movements in instruments that are
held for long-term cash flow rather than for short-term trading
The FASB’s draft financial instruments
standard, released late last month, proposes to introduce full fair
value measurement for financial instruments.
This is dramatically different to the
International Accounting Standards Board’s (IASB) financial
instruments standard, which contains a mixed measurement model
where fair value and amortised cost are used in different
The divergent standards threaten the IASB and
FASB’s project to converge IFRS with US GAAP.