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“Rather than concentrating on a full fair value model, the IASB should reduce complexity by simplifying the existing measurement requirements for financial instruments”, Sally Scutt, CEO of the International Banking Federation said.
Full fair value measurement of financial instruments would overstate the extent to which instruments are held for trading or managed on a fair value basis within the business and the extent to which deep and liquid markets exist, IBFed says in a concept paper on accounting for financial instruments.
Instead of the IASB determining that one approach offers a superior model to that of others, the aim should be for the accounting standards to accommodate the various business models and circumstances in which financial instruments are used, the paper states.
A mixed measurement model provides investors with better information for evaluating financial institutions. Where an entity does not manage instruments on a fair value basis, amortised cost is the more appropriate way to estimate future cash flows.