Financial assets measured at amortised cost can apply

Financial assets measured at amortised cost - can apply only
to debt instruments and must be designated upon initial
recognition. For the designation to be effective, the financial
asset must pass two tests as follows:
 The business model test

The cash flow characteristics test
Financial Assets

Classification
 The business model test – must be holding the
financial asset to collect in the contractual cash
flows associated with that financial asset.
 The cash flow characteristics test – to pass this
test, the contractual cash flows collected must
consist solely of payment of interest and
capital .
Financial Assets

Classification

A debt instrument that meets the following two conditions must
be measured at FVTOCI unless the asset is designated at
FVTPL under the fair value option (see below):

Business model test: The financial asset is held within a
business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets.
 Cash flow characteristics test: The contractual terms of the
financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount
outstanding.
 All other debt instruments must be measured at fair value
through profit or loss (FVTPL).
Financial Assets – Debt Instruments

Classification

All equity investments are to be measured at fair value in
the statement of financial position, with value changes
recognised in profit or loss, except for those equity
investments for which the entity has elected to present
value changes in 'other comprehensive income'.
Financial Assets - Equity

Measurement
Financial Assets
Classifica
tion
Measurement
FVTPL Initial measurement = FV is normally cost incurred (exclude
transactions costs)
Subsequent Measurement: Re-measurement to fair value
takes place at each reporting date, with any movement in fair
value taken to profit or loss for the year
Amortised
cost
Initial measurement = FV + transaction cost
Subsequent measurement – Amortised cost, annual review for
impairment. Impairment losses charged to P&L.

Measurement
Financial Assets
Classifica
tion
Measurement
FVTOCI Changes in fair value are recognized initially in Other
Comprehensive Income (OCI). When the asset is
derecognized or reclassified, changes in fair value previously
recognized in OCI and accumulated in equity are reclassified
to profit and loss

Classification

Financial liabilities at fair value through profit
or loss (FVTPL) (financial liabilities held for
trading)

Other financial liabilities measured at
amortised cost

If financial liabilities are not measured at FVTPL,
they are measured at amortised cost.
Financial Liabilities

Measurement
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Financial Liabilities
Classifica
tion
Measurement
FVTPL Initial measurement - FV is normally cost incurred (exclude
transactions costs)
Subsequent Measurement: Re-measurement to fair value
takes place at each reporting date. Gains and losses on
financial liabilities designated as at FVTPL to be split into the