‘An accounting mismatch may also arise where a non-financial asset is measured at fair value ond the related financial liability is measured at amortised cost. The amendment allows an entity to designate the related financial liability as at FVTPL provided that the entity concludes that the changes in fair value of both items are subject to the same risk and an ‘accounting mismatch will be eliminated or significantly reduced by the designation. Example ‘SABT Lid, an investment property company, adopts the fair value model to measure its investment properties. The fair value of the investment properties is highly dependent on interest retes. On 31 December 2018, SABT Ltd took out a R5 000 000 bank loan specifically to finance the purchase of some new investment properties. Fixed interest at the market rate of 6% is charged for the eight-year term of the loan. Transaction costs of R120 000 were incurred. A bank loan would normally be initially measured at feir value less transection costs and subsequently at amortised cost. In the case of SABT Ltd, the intial ‘measurement at fair value less transaction costs on 31 December 2018 would result in a financial liabilty of R4 880 000 (RS 000 000 ~ R120 000). ‘Subsequent measurement would then be at amortised cost. An effective interest rate would then need to be calculated to incorporate the 6% interest and the R120 000 transaction costs. This effective interest would be recognised as an expense in profit or loss for the year ended 31 December 2018, However, IFRS 9 offers an option to designate a financial lability on initial recognition as at FVTPL In order to eliminate or significantly reduce a measurement or recognition inconsistency (en ‘accounting mismatch’). This option is available to ‘SABT Ltd because the bank loan is being used specifically to finance the purchase of investment properties. Under the accounting policy of SABT Ltd, these investment properties will be measured at fair value with gains or losses recognised in profit or loss. Therefore, i the loan were measured at emortised cost, there would be a measurement inconsistency.