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Financial Instruments: Classification and Measurement

Date recorded:

Gains and losses related to fair value measurements in level 3 of the hierarchy

The Board considered the requirement for separate presentation on the face of the statement of comprehensive income of the total gains and losses for the period related to fair value measurement in Level 3 of the hierarchy.

In the outreach related to the Classification and Measurement ED, the Board was told by some constituents (mainly regulators) that separate presentation of gains and losses related to unreliable fair value measurement was superior to a mere disclosure in the notes, as data presented on the face of the statement of comprehensive income were seen to carry more weight.

Most of the Board members disagreed, as they felt that such information was already available under the requirements of IFRS 7, and regulators had enough powers to require any disclosures desired in prudential reporting. Moreover, some Board members were concerned that such separate presentation would not address the true issues as valuation uncertainly as well as earnings volatility had less predictive power for future financial performance for users.

The Board finally decided not to require such separate presentation as part of Financial Instruments project. Some Board members suggested that Financial Statement Presentation project was the right place to address such an issue. Moreover, the Board agreed to discuss this issue together with the FASB during the October joint meeting along with the proposal to disclose both fair value and amortised cost of financial instruments on the face of the statement of financial position.

The IASB's plan is to publish a final IFRS on classification and measurement of financial instruments in November 2009.