On 11 May 2010, the IASB issued an exposure draft (ED) proposing to amend the way the fair value option in IAS 39 Financial Instruments: Recognition and Measurement
is applied with respect to financial liabilities. The ED proposes that all gains and losses resulting from changes in 'own credit' for those financial liabilities that an entity chooses to measure at fair value should be recognised as a component of 'other comprehensive income' (OCI), not in profit or loss. Such gains or losses would be presented using a 'two-step approach':
- As a first step, an entity would present the full change in fair value in profit or loss.
- In the second step, the portion relating to changes in an entity's own credit risk would be presented as an offsetting entry in profit or loss and presented in OCI.
The ED does not propose any other changes for financial liabilities. Comment deadline on ED/2010/4 Fair Value Option for Financial Liabilities is 16 July 2010.
Click for IAS Plus Newsletter, May 2010
: IASB Issues Proposals on the Fair Value Option for Financial Liabilities