Hi guys, These terms are driving me nuts. Summary pg. 173 of book 2: Held to maturity investments are carried at cost under IFRS and US Gaap two lines down: Both IFRS and US Gaap alloq investments that would be classified as either HTM or AFS to be carried at fair value. So which one is it? Do we categorize HTM as historical cost or fair value? Throughout the reading, my understanding was that HTM is historical cost whereas AFS or HFT is fair value… but apparently, the summary seems to disagree with that. What’s going on?!
I think they mean securities that are HTM are to be carried at ammortised cost. However securities that WOULD NORMALLY be carried at HTM or AFS, can be carried at fair value under certain circumstances, but if they are classified as ‘designated at fair value’ they are no longer classified as HTM. So what you have above is correct its just the wording, if they are classified as Fair Value, then they are not HTM, but they could also be classified as HTM if the firm wishes… I think im confusing myself now…
I believe what it says in the text is that something that would normally be treated as HTM or AFS can be designated at fair value, by the company’s discression. In this case it is essentially treated in the same manner as held for trading. However, with IFRS you cannot reclassify out of this style; GAAP seems to be more lenient.
pedpenny is corect. Fair Value Instruments is one of the four classifications for minority passive investments, where the financial asset/liability is reported at fair value, with g/l reported on the I/S. The designation cannot be changed once assigned (as far as I know).