Banking (prudential standard) determination No. 4 of 2007 - Prudential Standard APS 111 - Capital Adequacy: Measurement of Capital
Application of the Fair Value OptionApplication of the Fair Value Option
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Application of the Fair Value Option
- An ADI may use the Fair Value Option in valuing its financial instruments provided:
(a) the ADI complies with all relevant requirements of the Australian accounting standards applicable to the use of the Fair Value Option;
(b) the Fair Value Option is only applied to financial instruments for which the ADI is able to reliably estimate fair values;
(c) the application of the Fair Value Option is covered by the ADI’s risk management systems, including related risk management policies, procedures and controls, both prior to the initial application for a particular activity or purpose and on an ongoing basis; and
(d) the ADI otherwise complies with the provisions in this Prudential Standard covering the use of fair values (refer to paragraphs 39(c) to (f), 44(c) to (f), and 52 to 55 inclusive).
- An ADI must provide information to APRA on its application of the Fair Value Option, as well as related risk management and valuation policies and procedures, including new applications of the Fair Value Option, if requested by APRA.