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Chapter 10

4.2 Classification: investments in debt

IFRS 9 specifies three ways of classifying debt investments:

 Amortised cost

 Fair value through other comprehensive income

 Fair value through profit or loss.

A financial asset is measured at amortised cost if:

 The objective of the business model within which the asset is held is to hold the
asset to maturity to collect the contractual cash flows

 The contractual terms of the asset give rise to cash flows that are solely
repayments of principal and interest of the principal amount outstanding.
Interest payments should offer adequate compensation for risk and the time
value of money.

A financial asset is measured at fair value through other comprehensive income if:

 The objective of the business model within which the asset is held is to both
collect contractual cash flows but also to increase returns when possible by
selling the asset

 The contractual terms of the asset give rise to cash flows that are solely
repayments of principal and interest of the principal amount outstanding.

If not classified as one of the above two categories, the financial asset is measured
at fair value through profit or loss.

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