Academic journal article Journal of Accountancy

The IASB Issued Requirements on the Accounting for Financial Liabilities That Address the Problem of Volatility in Profit and Loss (P&L) Arising When an Issuer Measures Its Own Debt at Fair Value - Often Referred to as the "Own Credit" Problem

Academic journal article Journal of Accountancy

The IASB Issued Requirements on the Accounting for Financial Liabilities That Address the Problem of Volatility in Profit and Loss (P&L) Arising When an Issuer Measures Its Own Debt at Fair Value - Often Referred to as the "Own Credit" Problem

Article excerpt

The IASB issued requirements on the accounting for financial liabilities that address the problem of volatility in profit and loss (P&L) arising when an issuer measures its own debt at fair value--often referred to as the "own credit" problem.

According to a news release, the requirements will be added to IFRS 9, Financial Instruments, and complete the classification and measurement phase of the IASB's project to replace IAS 39, Financial Instruments: Recognition and Measurement. They follow the IASB's November 2009 issuance of IFRS 9, which prescribed the classification and measurement of financial assets.

In response to feedback received during its consultation process, the IASB decided to maintain the existing amortized cost measurement for most liabilities, limiting change to that required to address the own credit problem. The ED, Fair Value Option for Financial Liabilities, issued in July 2009, proposed a two-step approach, which required the own credit amount to be shown first in P&L and then, as a second step, as a transfer to other comprehensive income (OCI).

With the new requirements, an entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity's own credit risk directly in the OCI section of the income statement, rather than within P&L. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.