The fair value option begins with a qualifying instrument and permitted election event. It is not a switch management can flip after seeing period-end earnings. Subsequent fair value and the applicable own-credit presentation must remain separate from the amortized-cost schedule used for comparison.
This module explains the boundary but does not value the debt or establish the election. A supplied fair value is not validated merely because the rollforward adds.
Elect only at a permitted date
ASC 825-10-25-4 lists the events at which an eligible item may enter the fair value option. The entity cannot wait for a favorable period-end movement and then elect. ASC 825-10-45-5 separates the financial-liability fair value change tied to instrument-specific credit risk under its presentation model.
The workpaper needs the eligible item, election event, documented election, valuation method, and presentation map. Compare fair value with amortized cost for analysis, but do not blend the two measurement bases. This page does not validate a specialist's fair value.
ASC 820-10-35-2 defines fair value as a market-based transfer price at the measurement date. That measurement requirement remains separate from the Topic 825 election.
Put the concept to work
Understand this concept
- Explain the eligibility, election-date, measurement, own-credit presentation, and disclosure questions that precede a supplied debt fair value option schedule.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Measurement basis — Analyze
To understand this concept: Required. Fair value is a different measurement basis, not an amortized-cost adjustment.