Skip to content

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

Godavari Steel Ltd adopts Ind AS 109 for the first time. At the date of initial application, it assesses whether a debt instrument held meets the business-model condition for amortised cost on the facts and circumstances existing at that date. In earlier years, the entity held similar instruments for trading. Which statement follows from Ind AS 109 transition requirements?

The business-model assessment is made on facts and circumstances at the date of initial application, and the resulting classification is applied retrospectively irrespective of the business model in earlier reporting periods. Therefore Godavari's earlier trading intent does not force FVTPL classification.

  1. AThe resulting classification is applied retrospectively irrespective of the business model in prior reporting periodsCorrect
  2. BThe classification must follow the business model that applied in the earliest period presented
  3. CClassification is applied prospectively only to instruments acquired after initial application
  4. DThe prior-period trading intent compels FVTPL classification

Explanation

Para 7.2.3 requires the assessment of the business-model condition based on facts and circumstances at the date of initial application. The resulting classification is applied retrospectively irrespective of the entity's business model in prior periods. So past trading intent does not dictate classification.

Did you get it right without looking?

One question tells you little. A timed set on Classification and Measurement of Financial Assets and Financial Liabilities shows your real accuracy, how long you take and where you lose marks.

Practise Classification and Measurement of Financial Assets and Financial LiabilitiesFree diagnostic mock

More Classification and Measurement of Financial Assets and Financial Liabilities questions