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Question 10 is an inquiry about the accounting for financial instruments FVTOCI, an exception to FVTPL for equity investments which are not held for trading.
Thirty-five (14.3%) of the responses in the comment letters in the study (MYCODE) were assigned a score of +1 to+ 2, meaning they agreed or strongly agreed with FVTPL measurement for all equities instruments.
Further, the majority suggested that if fair value measurement needed to be used to value financial instruments, the measurement should be recorded below profit and loss (not FVTPL) in the other comprehensive income column (FVTOCI) to avoid income volatility.
The author of ED/2009/7 letter 206 explained that the FASB proposed "that all financial instruments will be presented on the balance sheet at fair value with changes in value recognized in net income (FVTPL) or other comprehensive income (FVTOCI), with a measurement exemption for an entity's own debt under certain circumstances" (Letter 206 of ED/2009/7, p.
Whether such derivatives are measured at FVTPL depends on whether they are in scope of IAS 39.
Hence any net settled contracts to buy, or indeed sell, carbon credits are in scope of IAS 39 and measured at FVTPL. The same would apply for contracts that are entered into for trading purposes (i.e.
Where the credits are purchased in the secondary market, they are initially recognised at the purchase price (or at fair value on settlement if purchased under a forward contract measured at FVTPL as described above).
The examples show that hedge accounting can be beneficial when a forward contract to buy (or sell) carbon credits is caught in the scope of IAS 39 and measured at FVTPL (i.e.
As a consequence, its forward contracts over carbon credits are recognised as derivatives at FVTPL as they do not qualify for the IAS 39 own use scope exemption.
The debt securities classified as AFS will either be classified to the amortized cost category or to the fair value through profit and loss (FVTPL) category.
Applying the fair value option to measure the debt securities at FVTPL is an alternative to the fair value hedge.