Question

Provide insight on why the FASB made the fair value option irrevocable.

Answer 1

The fair value option is the alternative for a business to record its financial instrument at their fair value
The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments

The fair value option established by this Statement permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. A not-for-profit organization shall report unrealized gains and losses in its statement of activities or similar statement.

The fair value option:

May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method

Is irrevocable (unless a new election date occurs)

Is applied only to entire instruments and not to portions of instruments

From the above information u can get a clear image on why it had made it irrevocable