Business model test determines subsequent measurement of financial assets, guiding classification into amortised cost, FVTOCI or FVTPL. Classification of financial assets for subsequent measurement depends on two linked assessments: the business model test and the contractual cash flow characteristics test. The business model test examines how assets are managed to generate cash flows - held to collect, held to collect and sell, held for trading, or otherwise. If the business model is to collect or to collect and sell, the contractual cash flows must be examined to determine whether they are solely payments of principal and interest in the asset's currency; only if both tests are satisfied is measurement at amortised cost or fair value through other comprehensive income appropriate.
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Provisions expressly mentioned in the judgment/order text.
Business model test determines subsequent measurement of financial assets, guiding classification into amortised cost, FVTOCI or FVTPL.
Classification of financial assets for subsequent measurement depends on two linked assessments: the business model test and the contractual cash flow characteristics test. The business model test examines how assets are managed to generate cash flows - held to collect, held to collect and sell, held for trading, or otherwise. If the business model is to collect or to collect and sell, the contractual cash flows must be examined to determine whether they are solely payments of principal and interest in the asset's currency; only if both tests are satisfied is measurement at amortised cost or fair value through other comprehensive income appropriate.
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