Designate a previously recognised financial instrument
How should an entity designate a previously recognised financial instrument?
A financial liability may be designated as a liability measured at fair value through profit or loss provided it eliminates or significantly reduces the accounting mismatch. The requirement for such a designation is that it must be done only at the time of inception of the financial liability without undue delay. Ind AS 101 permits a financial liability to be designated at fair value through profit or loss account on the date of transition to Ind AS provided the aforementioned conditions are satisfied as on that date. Similarly, an entity is also allowed to designate a financial asset as measured at fair value through profit or loss on the basis of the facts and circumstances that exist as on the date of transition to Ind AS. It is pertinent to note that Ind AS 109 permits such designation only at inception without undue delay provided it eliminates or significantly reduces the accounting mismatch. An equity instrument can be designated at fair value through other comprehensive income provided it is done at the inception without undue delay and such investments are held not for trading purposes. Ind AS 101 permits entities to designate an equity investment at fair value through other comprehensive income provided the aforementioned conditions are met at the date of transition to Ind AS.
