How are gains and losses from Fair Value Through Profit or Loss (FVTPL) classified?

Gains and losses from Fair Value Through Profit or Loss (FVTPL) are classified as Profit and Loss. This classification is essential because it reflects the performance of financial instruments that are actively traded and subject to fluctuations in market value. Under the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), FVTPL is used for financial assets and liabilities that are held for trading purposes or that are designated as such upon initial recognition.

When financial instruments are classified as FVTPL, all changes in fair value—both gains and losses—are recorded directly in profit or loss for the period in which they arise. This treatment emphasizes the impact of fair value changes on the company's current financial performance, making it easier for stakeholders to assess the financial health and performance of the entity. In this context, classifying these gains and losses in profit or loss allows for transparency and provides immediate recognition of market risks and returns affecting the company's ongoing operations.