Reporting the financial performance of a range of entities (C 1.1)

IFRS 9, Financial Assets:

Recognition and Measurement:

• Recognition:
  1. Recognized when contractual obligations are entered into (e.g., signing a contract).
  2. Exceptions: Trade receivables are generally recognized upon shipment/delivery of goods.
• Initial Measurement:
  1. Generally at fair value.
  2. Transaction costs are treated differently based on the instrument's classification.

Financial Asset Measurement:

• Default Measurement: Fair Value through Profit or Loss (FVTPL)
• Exceptions:
  1. Amortized Cost: Held-to-maturity investments and certain loans and receivables.
  2. Fair Value Through Other Comprehensive Income (FVTOCI): Debt investments held for collection of contractual cash flows.

Key Factors for Classification:

1. Business Model: How the company intends to manage the investment (e.g., trading, collecting contractual cash flows).
2. Contractual Cash Flow Characteristics: Nature of cash flows promised by the investment (e.g., principal and interest payments).

Illustration:

• Business Model & Cash Flows: Classification depends on how the company manages the asset (e.g., holding, trading) and whether cash flows are solely principal and interest.
• Measurement Categories:
  1. Amortized Cost: Held for collecting cash flows, simple cash flows.
  2. FVOCI: Held for collections and sales, simple cash flows.
  3. FVTPL: Default, or elected to reduce accounting mismatches.

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