Fair Value Through Profit and Loss (FVTPL)

Brief Definition

Fair Value Through Profit and Loss (FVTPL) is an accounting classification for certain financial assets and liabilities. Under this method, changes in the fair value of these assets and liabilities are recognized directly in the profit and loss statement as they occur.

Further Explanation

Fair Value Through Profit and Loss (FVTPL) is an accounting classification for certain financial assets and liabilities. Under this method, changes in the fair value of these assets and liabilities are recognized directly in the profit and loss statement as they occur. This approach provides immediate reflection of gains and losses, making the financial statements more responsive to market changes.

Example:
A company holds a portfolio of trading securities. If the value of these securities increases by $5,000, this gain is immediately recorded as income in the profit and loss statement. Conversely, if the value decreases by $5,000, it is recorded as an expense.