The International Accounting Standards Board (IASB) published an Exposure Draft of a proposed limited amendment to
IAS 39 Financial Instruments: Recognition and Measurement on The Fair Value Option. The publication of this proposed amendment is a direct response to concerns expressed by prudential supervisors of banks, securities companies and insurers that the fair value option might be used inappropriately. The Exposure Draft proposes to limit the financial assets and financial liabilities to which the option may be applied, while preserving the key benefits of the option.
In particular, the proposals are:
to limit the types of financial assets and financial liabilities to which the option may be applied to five specified categories, and
to require that the option may be applied only to financial assets and financial liabilities whose fair value is verifiable. The proposal that fair value must be verifiable would apply only when the fair value option is used, and not for other items measured at fair value (those classified as held for trading, derivatives and available-for-sale assets) or for the purposes of disclosing fair value. It is a stricter test (which more items will fail) than that of “reliably measured” contained in other parts of IAS 39 and in other Standards.
Separately from this proposed amendment, discussions are continuing on another aspect of IAS 39, namely an additional hedging methodology and the balance sheet presentation of certain hedges.
Press release
© IASB - International Accounting Standards Board
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