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Under Ind AS 101, the IMPRACTICABILITY exception for the SPPI test allows an entity:
ATo skip the SPPI test entirely for legacy financial assets
BTo classify all such assets as FVTPL by default
CTo assess the contractual cash flow characteristics WITHOUT taking into account the modified time-value-of-money element or the significance of a prepayment feature's fair value, when impracticable at transition — with disclosure of the carrying amount of such assets
DTo use the previous-GAAP classification (HTM, AFS, etc.) indefinitely
Answer & Solution
Correct answer: C. To assess the contractual cash flow characteristics WITHOUT taking into account the modified time-value-of-money element or the significance of a prepayment feature's fair value, when impracticable at transition — with disclosure of the carrying amount of such assets
Ind AS 101 + Ind AS 109 impracticability exception — when the modified-TVM feature or prepayment-FV-significance is impracticable to assess at transition date, the entity can ignore those features when applying the SPPI test. Disclosure of the carrying amount is required until those financial assets are derecognised. This avoids hyper-detailed historical analysis when information isn't available.
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