Member States must allow or require financial instruments, including derivatives, to be measured at fair value and may extend fair value to other asset categories. Fair value applies to liabilities only when held for trading or when they are derivatives, and not to held-to-maturity instruments, originated loans and receivables not held for trading, interests in subsidiaries, associates and joint ventures, own equity instruments, contingent consideration in a business combination or instruments with special characteristics. Fair value is the market value where a reliable market exists, otherwise a value from generally accepted valuation models that reasonably approximates market value, failing which cost is used. Changes in fair value go through profit and loss except for hedging instruments under hedge accounting and exchange differences on a net investment in a foreign entity, which go to a fair value reserve, and Member States may also route available-for-sale assets there.
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