IASB February 2010 - AP 8

Both boards were present for the discussions; however, only the IASB was asked to take any tentative decisions.

The tentative decisions described below, coupled with the tentative decisions made on 10 February 2010, effectively retain the measurement requirements in IAS 39 Financial Instruments: Recognition and Measurement for financial liabilities, except for the proposed changes to the fair value option described below. The IASB's tentative decisions about financial liabilities respond to issues raised about recognising gains or losses arising from changes in an entity's own credit risk.

Amortised cost measurement

The IASB tentatively decided that financial liabilities should be measured at amortised cost if they are not held for trading, and if they do not have embedded derivative features that would require bifurcation under IAS 39.

Bifurcation

At a previous meeting, the IASB tentatively decided to bifurcate financial liabilities that are held to pay contractual cash flows, and that have 'non-vanilla' contractual cash flow characteristics. At this meeting, the Board tentatively decided that the bifurcation requirements in IAS 39 should be retained. This decision is in response to issues raised about recognising gains or losses arising from changes in an entity's own credit risk.

Fair value option

The IASB tentatively decided to retain the fair value option (FVO) and carry forward the three eligibility conditions in IAS 39.

However, to respond to issues raised about recognising gains or losses arising from changes in an entity's own credit risk, the Board also tentatively decided that for all financial liabilities designated under the FVO, an entity would be required to:

• recognise the total fair value change in profit or loss; and
• recognise the portion attributable to changes in own credit risk in other comprehensive income (OCI) (with an offsetting entry to profit or loss).

Amounts recognised in OCI would never be recycled into profit or loss.