CFM21540 - Accounting for corporate finance: International Financial Reporting Standards: IAS 39: classification of financial assets and financial liabilities: fair value through profit and loss: accounting periods since 1 January 2006

For those entities applying IFRS or FRS 101 with an accounting period beginning on or after 1 January 2018 refer to IFRS 9 for the recognition and measurement of financial instruments at .

FVTPL designation

Under IAS 39, an entity may, on initial recognition, designate a financial asset or financial liability as FVTPL when doing so results in more relevant information. A designation of a financial instrument as FVTPL will result in more relevant information when either:

  • it eliminates or significantly reduces a measurement or recognition inconsistency (an accounting mismatch) that would otherwise arise; or
  • a group of financial instruments is managed and its performance evaluated on a fair value basis, in accordance with a documented risk management strategy and information about the group of financial instruments is provided internally on that basis to the entity바카라 사이트™s key management personnel.

Examples of situations in which either an accounting mismatch may arise, or a group of financial instruments can be viewed as being managed and evaluated on a fair value basis, are included in the IAS 39 application guidance.

In addition to the above situations, an entity may designate a contract that contains one or more embedded derivatives as a financial asset or financial liability at fair value through profit and loss unless:

  • the embedded derivative does not significantly modify the cash-flows required by the contract; or
  • it is clear that separation of the embedded derivative is prohibited (for example, a prepayment option embedded in a loan that permits the holder to prepay the loan for approximately its amortised cost).

There are in addition various disclosure requirements and complex transition rules.