This free, guided checker walks your finance team through the key decision points for IFRS 9 Fair Value Option Election. Answer a few questions to see the likely treatment and the evidence to document.
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This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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The fair value option applies to financial liabilities and, in limited cases, financial assets that would otherwise be measured at amortized cost or FVOCI when conditions are met.
Apply default IFRS 9 classification and measurement - IFRS 9.4.1.1-4.1.4 for assets or 4.2.1 for liabilities - without fair value option designation.
Official guidance: IFRS issued standards
For financial liabilities, IFRS 9.4.3.5 may require FVTPL when a host liability would be measured at amortized cost and bifurcation criteria would apply to the embedded derivative.
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Official guidance: IFRS issued standards
Hybrid financial liabilities with index-linked or conversion features often require FVTPL for the entire instrument when bifurcation would not faithfully represent the combined cash flows.
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Official guidance: IFRS issued standards
A mismatch exists when assets and liabilities are measured on different bases and changes in those bases would affect profit or loss inconsistently; document the linked asset or liability creating the mismatch.
The mismatch condition in IFRS 9.4.2.2(a) and 4.1.5 is not met, so the fair value option is unavailable; apply default amortized cost or FVOCI classification (IFRS 9.4.1.2, 4.2.1).
Official guidance: IFRS issued standards
IFRS 9.B4.1.29 requires identification of the mismatched item; hedging relationships under IFRS 9 Chapter 6 may be an alternative to fair value option designation.
Identify and document the specific mismatched asset or liability contemplated by IFRS 9.B4.1.29 before electing the fair value option.
Official guidance: IFRS issued standards
IFRS 9.4.1.5 permits designation only at initial recognition unless specific reclassification events apply; late designation of existing instruments is generally prohibited.
Designation after initial recognition is prohibited (IFRS 9.4.1.5, 4.2.2); assess a potential prior-period error under IAS 8.41-42 if the instrument should have carried a different measurement.
Official guidance: IFRS issued standards
Board or treasury committee minutes, designation memos, and linkage to the mismatched asset or liability should be retained; reassessment after designation is not permitted.
Complete the irrevocable designation documentation contemporaneously with initial recognition (IFRS 9.4.1.5, 4.2.2) before the first accounting entries are posted.
Official guidance: IFRS issued standards
IFRS 9.5.7.7 requires own-credit fair value changes in OCI unless this creates or enlarges an accounting mismatch, in which case the irrevocable mismatch exception may apply.
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Official guidance: IFRS issued standards
The exception applies only when presenting own-credit changes in OCI would create or enlarge an accounting mismatch; document the linked item and irrevocable election.
Present own-credit fair value changes in OCI as required by IFRS 9.5.7.7(a) unless the 5.7.8 mismatch exception is documented at initial recognition.
Official guidance: IFRS issued standards
Designated instruments are remeasured to fair value at each reporting date with changes recognized under IFRS 9.5.7.1 and 5.7.7. Plan for the full disclosure load: IFRS 13.93 hierarchy and technique disclosures plus the IFRS 7.10-11 own-credit disclosures for designated liabilities. The common gap is a day-one valuation with no repeatable process, independent price verification, or input documentation for subsequent periods.
Establish the IFRS 13 fair value measurement process before the FVTPL designation becomes operational (IFRS 9.5.7.1; IFRS 13.9).
Official guidance: IFRS issued standards
IFRS 9 hedge accounting may address the same mismatch with less P&L volatility; document why fair value option is preferred when both are available.
Designate at FVTPL irrevocably at initial recognition and recognize fair value changes in profit or loss, subject to the own-credit OCI split for liabilities (IFRS 9.4.1.5, 4.2.2, 5.7.1, 5.7.7). Evaluate the IFRS 9.6.1.1 hedge accounting alternative before confirming the irrevocable fair value option election.
Official guidance: IFRS issued standards
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