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11.7 Measurement—Day one gains and losses
Publication date: 14 Oct 2019
us IFRS & US GAAP guide
Day one gains and losses occur when the entity uses a model to measure the fair value of the instrument and the model price at initial recognition is different from the transaction price.
The ability to recognize day one gains and losses is different under both frameworks, with gain/loss recognition more common under US GAAP.
US GAAP
| IFRS
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In some circumstances, the transaction price is not equal to fair value, usually when the market in which the transaction occurs differs from the market in which the reporting entity could transact. For example, banks can access wholesale and retail markets; the wholesale price may result in a day one gain compared to the transaction price in the retail market.
In these cases, entities must recognize day one gains and losses even if some inputs to the measurement model are not observable.
| Day one gains and losses are recognized only when the fair value is evidenced by a quoted price in an active market for the same instrument or is based on a valuation technique that only uses data from observable markets.
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