How fair value gains, when credit rating deteriorates?
The standard requires the company’s consideration of it's own credit standing when calculating the fair value gains. The perceived 'anomaly' of considering the gains in profit/ loss when the credit rating of entity deteriorates need to be helped with the disclosure of the fair value changes attributable to credit risk. When the assets of the company are measured at fair value, then the changes in credit spreads on such assets will impact on the fair value. It will create few counter intuitive results, for instance the income statement losses when the fair value of gains increases due to deterioration in credit quality.
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