5.5 Fair Value Option

Under both IFRS Accounting Standards and U.S. GAAP, an entity may elect the FVO for certain financial assets and financial liabilities under specific circumstances. However, because the scope of IFRS 9 differs from that of ASC 825 in certain respects, election of the FVO is not always permitted for the same items. The table below summarizes the key differences between the FVO under IFRS Accounting Standards and under U.S. GAAP.

Topic	IFRS Accounting Standards (IFRS 9)	U.S. GAAP (ASC 825-10)
Scope and qualifying criteria	An entity may elect the FVO for a financial asset or a financial liability only if certain qualifying criteria are met: Such an election eliminates or significantly reduces an “accounting mismatch” (i.e., an inconsistency in measurement or recognition). A group of financial liabilities or a group of financial assets and financial liabilities is managed and its performance evaluated on a fair value basis. The contract is not a financial asset and contains an embedded feature that meets certain criteria. Further, the FVO may be elected for a financial instrument that represents a credit exposure if the entity uses a credit derivative measured at FVTPL to manage its credit risk and certain criteria are met.	An entity may elect the FVO for most financial assets and financial liabilities; its ability to elect the FVO for eligible financial instruments is generally not limited.
Election dates	An entity may elect the FVO at initial recognition of a financial instrument. For financial instruments that represent credit exposures, election may be made after initial recognition or while the instrument is unrecognized.	An entity may elect the FVO at initial recognition of a financial instrument or upon the occurrence of certain specified events, such as when a previously recognized financial instrument becomes subject to the equity method of accounting.
Presentation of fair value changes of financial liabilities	For a financial liability for which the FVO has been elected, an entity defers fair value changes associated with credit risk through OCI unless doing so would create or increase an accounting mismatch. The balance in AOCI is not released into earnings upon derecognition of the financial liability.	For a financial liability for which the FVO has been elected, an entity defers fair value changes associated with credit risk through OCI. The balance in AOCI is released into earnings upon derecognition of the financial liability.