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Under Ind AS 109, financial liabilities are CLASSIFIED on initial recognition as either AMORTISED COST or FVTPL. The default category is:
AAmortised cost — but only for liabilities maturing within five years
BFVOCI — liabilities are typically managed through OCI
CFVTPL — most liabilities are subject to fair-value fluctuation
DAmortised cost — FVTPL applies only if the liability is held for trading, is contingent consideration in a business combination, or is designated under the fair-value option
Answer & Solution
Correct answer: D. Amortised cost — FVTPL applies only if the liability is held for trading, is contingent consideration in a business combination, or is designated under the fair-value option
Para 4.2.1 — financial liabilities default to AMORTISED COST. FVTPL applies only when held for trading, is contingent consideration in a business combination, is designated under the FVO (eliminates accounting mismatch or part of a managed-as-FV portfolio), or arises from non-derecognition of financial-asset transfers. There is no FVOCI category for financial liabilities (FVOCI applies to debt assets and equity assets under the irrevocable election).
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