Financial instruments — Limited amendments to IFRS 9

Date recorded:

Under IFRS 9, an entity may, at initial recognition, irrevocably designate a financial asset as measured at fair value through profit or loss if doing so eliminates or significantly reduces a measurement or recognition inconsistency.

IFRS 9 Financial Instruments has two measurement categories – amortised cost and fair value through profit or loss (FVPL) – the fair value option only applies to financial assets measured at amortised cost. However, in the limited amendments exposure draft, the IASB introduced a third category – fair value through other comprehensive income (FVOCI). The IASB proposed to extend the fair value option to financial assets that would fall into this third category. 

Most of the respondents to the proposals supported the IASB’s proposals.  However, some respondents supported an unrestricted fair value option. There were variations of an unrestricted fair value option: Some suggested it should be unrestricted only for items at FVOCI while other suggested unrestricted for all categories. Some respondents also commented that the fair value option should be better aligned with the proposals in the project on insurance liabilities. 

One board member questioned whether an unrestricted fair value option would really be that detrimental. The staff replied that an unrestricted fair value option would undermine a standard that distinguishes between different business models. 

When it was put to a vote, the Board supported the staff recommendation to confirm the proposals in the exposure draft. 

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