The role of fair value in accounting for financial instruments

Under International Financial Reporting Standards (IFRS), as under all other main accounting regimes used around the world, most assets and liabilities are not presently measured at fair value. IFRS contains two notable exceptions : - for property plant and equipment and certain intangible assets, measurement at fair value is permitted (though not required). - for some financial instruments, measurement at fair value is required. In addition, the IASB has recently proposed that any financial instrument not required to be measured at fair value be permitted to be measured at fair value at the entity's option. It is the second of these categories that this article will focus on. These are the items that are most often suggested as candidates for measurement at fair value. It has also been suggested that much of the complexity of the present system of accounting for financial instruments could be removed if ail financial instruments were to be measured at fair value. JEL classifications : G14, M41