DEBT INSTRUMENTS
Financial Assets at Amortized Cost
Requisites for The asset is held to
Classification collect its contractual
cash flows and
The asset’s contractual
cash flows represent
‘solely payments of
principal and interest’
Profit or Loss Effective interest income
Implications Impairments losses and
reversal gains
Gain or loss on
derecognition
Statement of Measured at amortized
financial cost
position Classified as a non-
current asset unless
maturity is within 12
months after the end of
the reporting period
Financial Assets at Fair Value Through Other
Comprehensive Income
Requisites for The objective of the business model is
Classification achieved both by collecting contractual
cash flows and selling financial assets;
and
The asset’s contractual cash flows
represent SPPI.
Profit or Loss Effective interest (income)
Implications Impairments losses and reversal gains
Gain or loss on derecognition including
reclassification adjustments (IAS 1)
OCI Changes in fair value due to subsequent
measurement
Statement of Measured at fair value after amortization
Financial for the effective interest
Position Cumulative gain or loss on fair value in
Equity
Since PFRS 5 excludes the scope for
financial assets, FVOCI are non-current
asset unless maturity is within 12 months
after the end of the reporting period.
Note that both amortization is applied
Note that both amortization is applied under the effective interest
under the effective interest method
method before applying the FV measurement requirement for
before applying the FV measurement
the FVOCI classification
requirement for the FVOCI
classification
Financial Assets at Fair Value Through Profit Or Loss
Requisites for This is a “residual category” if none of
Classification the two previously mentioned (AC and
FVOCI) business models apply or if any
of the two business model apply but the
contractual cash flows are NOT SPPI for
example if interest will include a profit
participation.
If the two requisites for the AC and
FVOCI category are met but the entity
elects to measure debt instruments at
FVPL to eliminate an “accounting
mismatch” because financial liabilities
are measured at FVPL.
Profit or Loss Nominal interest (income)
Implications Direct transaction cost incurred on
acquisition
Gain or loss on changes in fair value on
subsequent measurement
Gain or loss on derecognition
Statement of Measured at fair value
Financial Under the assumption the Financial asset
Position is held for trading, FVPL shall be
classified as a current asset (PAS 1)