Autore
Palea, Vera

Titolo
Accounting for Sustainable Finance: Does Fair value Accounting Fit for Long-term Investing in Equity?
Periodico
Università degli studi di Torino. Dip. Di Economia e Statistica Cognetti de Martiis. Working paper series
Anno: 2019 - Volume: 5 - Fascicolo: 12 - Pagina iniziale: 1 - Pagina finale: 37

In the Action Plan on Sustainable Finance, the European Commission has called for a fitness check of fair value accounting for long-term equity investments, which are considered crucial for retooling the European economy toward sustainable development. Sustainable development is a founding value of the European Union as well as the objective of the Paris Agreement on climate change and the UN 2030 Agenda. This paper shows that there is good reason for the European Commission’s request, as fair value accounting can significantly contribute to asset reallocation away from equities. The paper provides a definition of “long-term equity investment” for accounting purposes and proposes a dual measurement system based on historical cost as a recognized amount on the balance sheet and fair value in the disclosure notes. Such a system would address the need to both reduce volatility in investors’ balance sheets and provide financial statement users with the information they need to properly assess management’s stewardship and the future net cash inflows to the entity. Under a dual measurement system, the objective of transparency in financial reporting would be balanced with that of maintaining financial stability and economic growth, which are core to sustainability. The paper concludes with policymaking recommendations.



Testo completo: https://www.est.unito.it/do/home.pl/Download?doc=/allegati/wp2019dip/wp_12_2019.pdf

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