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Under Ind AS 109, financial liabilities designated at FVTPL under the FAIR-VALUE OPTION present subsequent changes in fair value attributable to CHANGES IN THE ENTITY'S OWN CREDIT RISK:
AFully in profit or loss — all FV changes on FVTPL liabilities go through P&L
BIn OCI (NOT recycled to P&L) — only the remaining FV change (interest-rate movements, etc.) goes through P&L
CNot at all — own-credit-risk changes are excluded from FV measurement of liabilities
DIn OCI and recycled to P&L on derecognition of the liability
Answer & Solution
Correct answer: B. In OCI (NOT recycled to P&L) — only the remaining FV change (interest-rate movements, etc.) goes through P&L
Para 5.7.7 — for liabilities designated at FVTPL, the FV change attributable to changes in the liability's OWN CREDIT RISK is presented in OCI, NOT P&L. This prevents the counter-intuitive "gain on own credit deterioration" hitting P&L. Crucially, the OCI amount is NOT recycled to P&L on derecognition — it transfers within equity. The remaining FV change (interest rate, market factors) flows through P&L.
Related questions
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