EFRAG's draft comment letter on the IASB's ED Fair Value Option for Financial Liabilities
09 June 2010
The IASB’s ED only focuses on accounting for own credit risk on liabilities that entities choose to measure at fair value. However, EFRAG solicits additional views of constituents on some overarching aspects of the new requirements for classification and measurement of financial instruments.
EFRAG has issued its draft comment letter on the IASB's ED Fair Value Option for Financial Liabilities. The letter can be downloaded here. Comments are invited on the letter by 6 July 2010.
In May 2010 the IASB issued the Exposure Draft Fair Value Option for Financial Liabilities (the ED). The ED sets out proposals for the measurement of financial liabilities in the scope of IFRS 9, to which an entity elects to apply the fair value option. In particular, the ED proposes that the effects of changes in the own credit risk of such liabilities should not affect profit or loss, but should be reported in other comprehensive income (OCI).
EFRAG agrees that fair value changes due to changes in an entity’s own credit risk from remeasurement of liabilities designated under the fair value option should not impact profit or loss. However, we do not support the two-step approach whereby changes are taken to profit and loss and then reallocated to OCI.
The exposure draft only focuses on accounting for own credit risk on liabilities that entities choose to measure at fair value. However, we would like to use this opportunity to solicit views of constituents on some overarching aspects of the new requirements for classification and measurement of financial instruments. Therefore, we would appreciate your responses to the questions set out in Appendix 2 to the letter.
© EFRAG - European Financial Reporting Advisory Group
