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Under Ind AS 109, when a financial asset is reclassified from FVTPL to AMORTISED COST (because the entity's BM changes from sell-driven to hold-to-collect):
AFV on reclassification date becomes the new gross carrying amount; the entity calculates a NEW EIR from that date based on remaining cash flows and applies it prospectively
BReclassification is not permitted in this direction — only AC → FVTPL is allowed
CThe asset is restated as if it had always been amortised cost — prior P&L gains/losses reversed
DAsset stays at fair value but FV changes go through OCI from the reclassification date
Answer & Solution
Correct answer: A. FV on reclassification date becomes the new gross carrying amount; the entity calculates a NEW EIR from that date based on remaining cash flows and applies it prospectively
Para 5.6.3 + B5.6.2 — FVTPL → AC reclassification: FV on reclassification date is the new gross carrying amount; new EIR is computed from that date. Previous gains/losses in P&L are NOT reversed (reclassification is PROSPECTIVE). Similarly, AC → FVTPL re-measures and the gap hits P&L immediately; FVOCI ↔ AC use FV but with OCI/equity adjustment to reflect cumulative differences. All directions are permitted in principle — only the BM-change trigger and the prospective treatment apply universally.
Related questions
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