Last update 16/08/2019
The asset is measured at fair value. Changes in fair value are recognised in profit and loss as they arise.
Financial assets should be classified as fair value through profit or loss if they do not meet the criteria for fair value through other comprehensive income or amortised cost. Fair value through profit and loss is the residual classification for financial assets. If FVOCI or AC do not fit it is FVPL/FVTPL.
In order to ascertain whether a financial liability is to be subsequently carried at other than fair value (this is at amortised historical cost), the criteria in IFRS 9 (and before that IAS 39) are to be applied (that is, these criteria have not been revised, unlike those for financial assets). Two measurement categories exist:
- Fair value through profit or loss (FVPL), used for financial liabilities that are held for trading, and
- Amortised historical cost, used for all other financial liabilities, unless the fair value option is elected.
Fair value option
Under IFRS 9, an entity can, 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 (sometimes referred to as ‘an accounting mismatch’).
Accounting policy example
Financial assets are recognised initially at fair value, normally being the transaction price plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The subsequent measurement of financial assets depends on their classification, as set out below. The group recognises financial assets when the contractual rights to the cash flows expire or the financial asset is transferred to a third party.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are carried on the balance sheet at fair value with gains or losses recognised in the income statement. Derivatives, other than those designated as effective hedging instruments, are classified as held for trading and are included in this category.
Derived from BP Plc’s Financial Statements 2017
https://www.bp.com/en/global/corporate/investors/results-and-reporting/annual-report.html
Financial assets at fair value through PL – Example
Financial assets at fair value through PL – Example Financial assets at fair value through PL – Example Financial assets at fair value through PL – Example
Financial assets at fair value through PL – Example Financial assets at fair value through PL – Example Financial assets at fair value through PL – Example