Split Accounting Is Permitted in Certain Situation
As stated earlier. FAS 133 requires all derivatives to be
valued at their fair values (at each financial reporting date).
Thus both the time value element and the intrinsic value
element are valued at fair value. FAS 133 does not require
separate disclosure of either the time value element's value or
the intrinsic value element's fair value, ln practice, the fair
value of FX options most always are determinable in total—
not by trying to determine the fair value of each FX option's
two elements and then summing together those two elements.
Accordingly, the need to determine the breakdown of the
total fair value occurs only if split accounting is used.