Under IFRS, investment assets must be grouped into which categories?

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Multiple Choice

Under IFRS, investment assets must be grouped into which categories?

Under IFRS 9, financial assets are grouped by how they are measured and where the changes in value are recognized: amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). An asset is measured at amortized cost when the business model is to hold it to collect contractual cash flows and the asset’s cash flows are solely payments of principal and interest. For debt instruments, FVOCI applies when the asset is held to collect and sell and the entity elects to present changes in fair value in OCI; for equity instruments, there is an optional election to present fair value changes in OCI as well. All other assets fall into FVTPL, where changes in fair value are recognized in profit or loss. The former “held to maturity” category is not used under IFRS 9; that concept came from the older IAS 39 framework, and IFRS 9 uses the three measurement bases above.

Under IFRS 9, financial assets are grouped by how they are measured and where the changes in value are recognized: amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). An asset is measured at amortized cost when the business model is to hold it to collect contractual cash flows and the asset’s cash flows are solely payments of principal and interest. For debt instruments, FVOCI applies when the asset is held to collect and sell and the entity elects to present changes in fair value in OCI; for equity instruments, there is an optional election to present fair value changes in OCI as well. All other assets fall into FVTPL, where changes in fair value are recognized in profit or loss. The former “held to maturity” category is not used under IFRS 9; that concept came from the older IAS 39 framework, and IFRS 9 uses the three measurement bases above.

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