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IAS 39 — Fair value option

Background

The IASB received comments from regulators about the permission in IAS 39 Financial Instruments: Recognition and Measurement to designate any financial asset or financial liability as one to be measured at fair value with changes in fair value reported in profit or loss (the 'fair value option').

Consequently the Board considered amending IAS 39 so that the fair value option could be applied only in specified circumstances. The specified circumstances would be those that the Board had in mind when it developed the option, i.e. for a financial asset or financial liability that is reliably measurable and meets one of the following:

  • The item is a financial asset or financial liability that contains one or more embedded derivatives as described in paragraph 10 of IAS 39
  • The item is a financial liability whose amount is contractually linked to the performance of assets that are measured at fair value
  • The exposure to a change in the fair value of the financial asset or financial liability is substantially offset by the exposure to the change in the fair value of another financial asset or financial liability, including a derivative.

 

Current status of the project

This project has been completed. The IASB issued The Fair Value Option (Amendments to IAS 39) on 15 June 2005.

 

Project milestones

DateDevelopmentComments
21 April 2004 Exposure draft Amendments to IAS 39 Financial Instruments: Recognition and Measurement - The Fair Value Option published Comment deadline 21 July 2004
16 March 2005 Public roundtables held
15 June 2005 The Fair Value Option (Amendments to IAS 39) issued Effective for annual periods beginning on or after 1 January 2006

Correction list for hyphenation

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