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Under Ind AS 109, the FAIR VALUE OPTION (designating a financial asset at FVTPL at initial recognition) is available only when:
AThe asset is held for less than 12 months
BThe entity wants to simplify reporting by avoiding amortised cost
CDesignation eliminates or significantly reduces a measurement or recognition inconsistency ("accounting mismatch") that would otherwise arise
DThe asset's fair value is more easily measurable than amortised cost
Answer & Solution
Correct answer: C. Designation eliminates or significantly reduces a measurement or recognition inconsistency ("accounting mismatch") that would otherwise arise
Para 4.1.5 — the FVO is available only when designation eliminates/reduces an accounting mismatch (e.g., a hedge-like relationship between an asset and a liability measured differently). The designation is IRREVOCABLE at initial recognition. Simplification, holding period, or measurement convenience are NOT grounds.
Related questions
Under Ind AS 109, a debt instrument with a HOLDER-PUT or ISSUER-PREPAY option meets the SPA financial institution holds assets to meet LIQUIDITY needs in a stress-case scenario. ThA loan pays an INVERSE FLOATING interest rate (the rate moves opposite to market interest An entity holds short-term investments to fund a future capital expenditure. Sales are INFA perpetual instrument can be called by the issuer at any time at par + accrued interest. A bond is CONVERTIBLE into a fixed number of equity instruments of the issuer. Under Ind AA bond's principal and interest payments are LINKED TO AN UNLEVERAGED INFLATION INDEX in tUnder Ind AS 109, a financial asset can be subsequently measured at AMORTISED COST only wh