Long-term financial liability classified as FVTPL
Can a long-term financial liability be classified as subsequent measured at fair value through profit or loss?
Yes. An entity may, on initial recognition, designate a financial liability as measured at fair value through profit or loss. If an entity exercises this option, then it cannot be revoked at any point of time. Also, the fair value option to designate a financial liability on initial recognition will be permitted only when doing so results in presenting more relevant information. This can be on account of two situations:
- Where it eliminates or significantly reduces a measurement or recognition inconsistency usually referred to as an accounting mismatch.
- A group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on fair value basis as per the designated risk management strategy of the entity.
