ACCA FR · Chapter 7 · Question 1 of 10
Under IFRS 9, how should an investment in a bond be measured if it is held in a business model whose objective is to collect contractual cash flows, and those cash flows are solely payments of principal and interest?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) At amortised cost
Explanation
A debt instrument that passes both the business model test (held to collect contractual cash flows) and the contractual cash flow characteristics test (solely payments of principal and interest) is measured at amortised cost using the effective interest method. If the business model is to both collect and sell, FVOCI is used. Otherwise the default is FVTPL.
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