CAF-6 · Chapter 2 · Question 4 of 15
Beta Ltd acquires a debt instrument. Its business model is solely to hold the asset to collect contractual cash flows. Additionally, the cash flows represent solely payments of principal and interest (SPPI). How must this financial asset be classified?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Amortised cost
Explanation
A debt instrument is classified at amortised cost if it meets both the 'hold to collect' business model test and the SPPI (solely payments of principal and interest) test.
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