Codification Topic 825

Financial Instruments

Fair Value Option

SFAS No. 159, February 2007

" The Fair Value Option for Financial Assets and Financial Liabilities"

Fair Value Option(FVO)

--> Option to measure eligible items at fair value

Eligible items: asc 825-10-15-4

(a) Financial assets and financial liabilities

--> except the items not eligible listed in asc 825-10-15-4

(b) Other eligible items listed in asc 825-10-15-4

Items not eligible: asc 825-10-15-5

(a) Investment in a subsidiary to be consolidated

(b) Investment in a Variable Interest Entities (VIE) to be consolidated

(c) Other items listed in asc 825-10-15-5

Election of FVO

FVO is applied "instrument by instrument."

 FVO is elected when the eligible item is "first recognized."

Once FVO is elected

--> the decision is "irrevocable."

Items Fair Value Option was elected for

Measured at "fair value"

Unrealized gains and losses are recognized in "earnings."

FVO may be elected for the following:

1. Investment in HTM securities

2. Investment in AFS securities

3. Investment in equity securities for "equity method"

--> 20% or more, but no more than 50% of ownership

4. Financial liabilities

HTM: Held-to-Maturity

AFS: Available for Sale