CFM21870 - IFRS 9: measurement of financial assets and liabilities: own credit risk

For those entities applying IFRS or FRS 101 with a period of account beginning before 1 January 2018 refer to IAS 39 for the recognition and measurement of financial instruments at CFM21520+

Where a company has a financial liability that is measured at fair value through profit or loss, the fair value of the liability can depend on the credit worthiness of the company. As a result, where the credit worthiness of a company deteriorates the fair value of the liability will typically reduce, resulting in a fair value gain. And where the credit worthiness of a company improves the fair value of the liability will typically increase, resulting in a fair value loss.

IFRS 9 requires the fair value movements in a financial liability that are attributable to changes in the credit risk of that liability should be presented in other comprehensive income, as opposed to being presented in profit or loss. This does not apply where this treatment would create or would enlarge an accounting mismatch.

Further guidance

Change of accounting basis: own credit risk (CFM76120)