What is the best accounting method for financial assets?

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

The possibility to fulfill the lack of studies comparing methods for financial assets accounting at fair value in terms of value relevance for investors is the main contribution of this research. Such contribution is emphasized by the importance of assessing how well accounting amounts reflect information used by investors. This study compares available for sale financial assets with financial assets at fair value through profit or loss in terms of value relevance for investors. The results evidence that although accounting differently both methods provide equally strong explanatory power of security prices which favors fair value accounting.