Re-classify from HTM to Available for sale investment’s (AFS)

Question

Company had investments in debenture’s under held to maturity (HTM) category. Which has been purchased sometimes back. And company's intention to hold it till maturity has changed, therefore they have sold this debenture investment during last year (before maturity). Once there’re intention changed, as per IAS’s this needs to re-classify from HTM to Available for sale investment’s (AFS).

However during current accounting period, company has purchased few more debenture’s in similar nature, this time around they have a clear ability and intention to hold it, till it’s maturity.

The question is can they go ahead with the classification of HTM or should they classify it as AFS or different category of financial asset ? 

Answer 1

According to IFRS 9- Financial Instrument, Investment in debenture comes under debt instrument and debt instrument can be measured in one of three ways:

1) Amortised cost

2) Fair value through other comprehensive Income (FVTOCI)

3) Fair value through Profit or Loss (FVTPL)

Classification is Based upon management intentions. But According to situation Company should classify it as Fair value through other comprehensive income (FVTOCI). An investment in a debt instrument is measured at FVTOCI if:

- The financial asset held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

- The contractual terms of the financial asset give rise on specified dates to cash flows that solely payments of principal and interest on the principal amount outstanding.

Comments

Please clarify more , hope you haven't understand my question .