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Equity Instruments - Research on Measurement

Why is EFRAG consulting?

POSSIBLE ALTERNATIVE ACCOUNTING TREATMENTS TO FAIR VALUE MEASUREMENT FOR LONG-TERM INVESTMENT PORTFOLIOS OF EQUITY AND EQUITY-TYPE INSTRUMENTS
As part of its Action Plan on Sustainable Finance, the European Commission ("EC") announced it would ask EFRAG to explore potential alternative accounting treatments to ("FV") measurement for long- term investment portfolios of equity and equity-type instruments.

In June 2018, EFRAG received a request for advice from the EC in relation to the accounting requirements for investments in equity instruments.

The request for advice is part of the EC’s initiatives to orient capital flows towards investment in sustainable activities.
 
The request for advice asks EFRAG to consider alternative accounting treatments to measurement at fair value through profit or loss (FVPL) for equity instruments.

According to the request for advice, such possible alternative accounting treatments should serve the following objectives:
  • properly portray the performance and risks of long-term investment business models, in particular for those equity and equity-type investments that are much needed for achieving the UN Sustainable Development Goals and the goals of the Paris Agreement on Climate Change;
  • preferably enhance investors’ insight in the long-term performance of investments, as opposed to recognising point-in-time market-based value changes in reported profit or loss during the duration of the equity investment.