Overview
Securities that are bought with the intention of selling them later are clasified as Fair Value through Profit or Loss. It is not required that the firm does not intend to sell the security in the near term, only that it is the intent to sell the security eventually.
Fair Value
A company that is holding a security as Fair Value through Profit or Loss, must assess the fair value of the asset mark that value in its books. Fair value is assessed in different ways depending on the asset in question.
- Quoted Prices in the Marketplace
- Valuation Model
Treatment
The value of the asset must be held at fair value (see above) on the balance sheet. Changes in the fair value of a security are required to be included in the firms income.