Reporting the financial performance of a range of entities (C 1.2)

IFRS 9, financial liabilities:

IFRS 9 Financial Liability Measurement

• Generally Amortized Cost: Most financial liabilities are measured at amortized cost, with interest expense recognized based on the effective interest rate.  
• FVTPL Exceptions:
  • Held for trading (e.g., derivatives).
  • Designated at FVTPL to eliminate accounting mismatches.
• Credit Risk Impact:
  • Deteriorating credit: Liability fair value decreases (gain).  
  • Improving credit: Liability fair value increases (loss).  
• Credit Risk Movements:
  • Generally presented in other comprehensive income (OCI).  
  • Excluded from OCI if it creates or enlarges an accounting mismatch.  

While most liabilities are measured at amortized cost, FVTPL applies to trade liabilities and those designated to address accounting mismatches. Changes in the liability's fair value due to credit risk are typically recognized in OCI.

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