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Under Ind AS 109, the CLASSIFICATION of a financial asset is based on:
AOnly the contractual cash flow characteristics — solely payments of principal and interest
BBoth (a) the entity's business model for managing the asset, AND (b) the contractual cash flow characteristics of the asset
CThe historical cost classification adopted under previous GAAP
DOnly the entity's intended holding period — held to maturity, available for sale, or trading
Answer & Solution
Correct answer: B. Both (a) the entity's business model for managing the asset, AND (b) the contractual cash flow characteristics of the asset
Para 4.1.1 — classification is the JOINT result of two tests: the business model test (how the entity manages the asset) and the SPPI test (whether contractual cash flows are solely payments of principal and interest). Old Ind AS 39 / IAS 39 categories (HTM, AFS, trading) are not used under Ind AS 109.
Related questions
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