ACCA Applied Skills · Financial Reporting · Financial instruments
Which of the following financial assets must be measured at amortised cost under IFRS 9, assuming no fair value option is elected?
A debt instrument with solely principal and interest cash flows held to collect contractual cash flows is measured at amortised cost. Collect-and-sell models give FVOCI, while equity investments and derivatives are normally measured at fair value through profit or loss.
- AA debt instrument held within a business model of collecting contractual cash flows, whose cash flows are solely payments of principal and interestCorrect
- BA debt instrument held within a business model of collecting cash flows and selling, with cash flows solely payments of principal and interest
- CAn equity investment in a listed company held for long-term strategic reasons
- DA derivative that is not designated in a hedging relationship
Explanation
Amortised cost requires both a hold-to-collect business model and SPPI cash flows. The collect-and-sell model gives FVOCI, equity investments are FVPL (or FVOCI by irrevocable election), and derivatives are FVPL.
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