CA Final · Financial Reporting · Classification and Measurement of Financial Assets and Financial Liabilities

Ananya Pharma Ltd adopts Ind AS 109 classification requirements for the first time at the date of initial application. In earlier periods, it managed a bond portfolio with a trading business model, but at the date of initial application the facts and circumstances show that the portfolio is held to collect contractual cash flows. The bonds meet the contractual cash flow characteristics test. Which statement follows from para 7.2.3?

Classification is assessed on the facts and circumstances existing at the date of initial application and the result is applied retrospectively, irrespective of the business model in prior reporting periods. The earlier trading model therefore does not govern, and the business model is not ignored.

1. AClassification is assessed on facts existing at the date of initial application and applied retrospectively, irrespective of the prior-period business modelCorrect
2. BClassification must follow the business model that applied in the earliest period presented
3. CClassification is applied prospectively only to bonds acquired after the date of initial application
4. DClassification is based on the contractual cash flow test alone, with the business model ignored