Page 167 - SBR Integrated Workbook STUDENT S18-J19

Financial instruments

2.3 Fair value through profit or loss

The accounting treatment of financial liabilities categorised as fair value through profit
or loss is as follows:

 They are initially recognised at fair value (normally the proceeds received)
with any transaction costs (such as legal or broker fees) expensed to profit or
loss.

 They are subsequently remeasured to fair value at each reporting date with
the gain or loss in profit or loss.

If the liability has been designated to be measured at fair value to reduce an
accounting mismatch then the movement in fair value is split into two components:

 the fair value change due to own credit risk (the risk that the entity which has
issued the financial liability will be unable to repay or discharge it), which is
presented in other comprehensive income

 the remaining fair value change, which is presented in profit or loss.

161