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An entity originates loans and immediately sells them to a securitisation vehicle that the entity CONTROLS and consolidates. In the CONSOLIDATED financial statements, the business model is:
ABoth hold-to-collect and sell — the group both originates and securitises
BHold-to-collect contractual cash flows — the consolidated group holds the loans to collect from the underlying borrowers
COther (FVTPL) — securitisation arrangements default to FVTPL
DSell (FVTPL) — the originating legal entity sells immediately on origination
Answer & Solution
Correct answer: B. Hold-to-collect contractual cash flows — the consolidated group holds the loans to collect from the underlying borrowers
In consolidated statements, the SPV is consolidated and the loans aren't derecognised — the GROUP'S business model is to hold-to-collect from the underlying borrowers. (In the originator's SEPARATE statements, the business model is hold-to-sell, since it just originates and sells to the SPV.) This is a key distinction in Ind AS 109's business-model assessment.
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