Fair value option for assets

Learning objectives

• Support the irrevocable designation of an asset at fair value through profit or loss to eliminate or significantly reduce an accounting mismatch.L2

Normative references

• IFRS 9 §4.1.5At initial recognition, the entity may irrevocably designate a financial asset at FVTPL if doing so eliminates or significantly reduces an accounting mismatch (measuring assets or liabilities, or recognising the gains and losses on them, on different bases).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• The entity may designate a financial asset at fair value through profit or loss after initial recognition, at the time the accounting mismatch arises.L2
• Rhône SA acquires bonds that would be measured at amortised cost. It funds them with a borrowing measured at fair value through profit or loss, which would create an accounting mismatch. Which course of action is possible for the bonds?L2