What does the "practicality exception" for equity securities allow?

The practicality exception for equity securities allows companies to measure these securities at cost, less any impairment, while also considering observable price changes. This approach provides a simplified measurement framework that eases the reporting burden on entities while still ensuring that the financial statements reflect current circumstances.

By permitting measurement at cost rather than requiring constant fair value assessments, the practicality exception acknowledges that for certain investments, particularly those without readily determinable fair values, it can be excessively complex and burdensome to continuously evaluate market conditions. Thus, reporting entities can confidently report their equity investments based on cost, with adjustments only when there are observable changes in price or when impairment occurs, ensuring the financial statements remain relevant and reliable without overly complicating the process. This balanced approach facilitates more efficient financial reporting for companies holding such securities.