At this time, we support further consideration of four different measurement attributes for liabilities.

1. Fair value – Standard-setters define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e., an exit price. Because fair value, as proposed to be defined by the IASB, is a price in a current market transaction, this measurement attribute reflects the impact of the entity's own credit risk.

2. Amortised cost. – For a liability, amortised cost is 'the amount at which the liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount'. Typically, this measurement attribute reflects the entity's own credit risk at initial recognition. For example, when a financial liability is measured at the amount of cash proceeds received, the amount of cash proceeds generally reflects the entity's credit risk. However, subsequent changes in credit risk are not reflected in subsequent measurements.

3. Current Measurement Using a Frozen Credit Spread – This measurement attribute uses a present value technique that discounts the expected future cash flows at a current benchmark rate (such as a risk free rate, an interbank benchmark rate, or a bank prime rate) plus (or, in some circumstances, minus) the spread that applied to the liability at initial recognition. Subsequent measurements reflect changes in the benchmark rate; but changes in credit risk are ignored. Similar to amortised cost, this measurement attribute reflects the entity's own credit risk at initial recognition, but subsequent changes in credit risk are not reflected in subsequent measurements.

4. Current Measurement Using a High Quality Credit Approach – This measurement attribute uses a present value technique that discounts the expected future cash flows using a current high quality discount rate, for example, the current risk free rate or the current discount rate for high quality corporate bonds. This measurement attribute excludes the effect of the specific credit risk of the issuer both at initial recognition and in subsequent measurements.

In determining the best subsequent measurement attribute, the board should consider the relevance of changes in the issuers own credit to investors. For example, for most debt obligations, the issuer does not have the practical ability to realise gains associated with decreases in their credit worthiness. They are also not required to absorb losses associated with increases in their credit worthiness in debt obligations. Thus, changes in an issuer's own credit is generally not relevant and should not be incorporated in the subsequent measurement of most debt obligations. This would lead to debt obligations being measured at amortised cost or a current measurement using a frozen credit spread (whether fixed rate debt obligations should be measured using a frozen or current benchmark interest rate is not a topic for this Discussion Paper). Where the issuer could realise changes in value of a liability due to changes in its own credit risk, a measurement attribute incorporating current risk (e.g., fair value) may be appropriate.