Fair Value Option
SFAS No. 159, February 2007
” The Fair Value Option for Financial Assets and Financial Liabilities”
” The Fair Value Option for Financial Assets and Financial Liabilities”
Fair Value Option(FVO)
–> Option to measure eligible items at fair value
–> Option to measure eligible items at fair value
Eligible items: asc 825-10-15-4
(a) Financial assets and financial liabilities
–> except the items not eligible listed in asc 825-10-15-4
(b) Other eligible items listed in asc 825-10-15-4
(a) Financial assets and financial liabilities
–> except the items not eligible listed in asc 825-10-15-4
(b) Other eligible items listed in asc 825-10-15-4
Items not eligible: asc 825-10-15-5
(a) Investment in a subsidiary to be consolidated
(b) Investment in a Variable Interest Entities (VIE) to be consolidated
(c) Other items listed in asc 825-10-15-5
(a) Investment in a subsidiary to be consolidated
(b) Investment in a Variable Interest Entities (VIE) to be consolidated
(c) Other items listed in asc 825-10-15-5
Election of FVO
FVO is applied “instrument by instrument.”
FVO is elected when the eligible item is “first recognized.”
Once FVO is elected
–> the decision is “irrevocable.”
–> the decision is “irrevocable.”
Items Fair Value Option was elected for
Measured at “fair value”
Unrealized gains and losses are recognized in “earnings.”
FVO may be elected for the following:
1. Investment in HTM securities
2. Investment in AFS securities
3. Investment in equity securities for “equity method”
–> 20% or more, but no more than 50% of ownership
4. Financial liabilities
2. Investment in AFS securities
3. Investment in equity securities for “equity method”
–> 20% or more, but no more than 50% of ownership
4. Financial liabilities
HTM: Held-to-Maturity
AFS: Available for Sale
AFS: Available for Sale
For HTM and AFS, refer to asc 320