EIRP Proceedings, Vol 4 (2009)

Abstract

The measurement of assets and liabilities at fair value, with its subsequent gains or losses recognized in profit or loss, should be limited to financial investments that are readily convertible into cash or cash equivalents in active markets, and are not constrained by any business purpose. On the other hand, even though assets and liabilities are exposed to changes in the market price, those that are expected to obtain future funds and are constrained by some business purpose (non-financial investments) should not be measured at fair value through profit and loss. Under the Accounting Standard for Financial Instruments, fair value measurement is required in certain circumstances similar to IFRS or US GAAP. This paper describes how the fair value is used under the Standard and purposes to decide whether fair value measurement is required or not based on the type of investment.