Accounting · Financial Instruments (IFRS 9)
Which of the following statements accurately describes criteria for the classification and initial recognition of financial assets in accordance with IFRS 9 Financial Instruments?
- 1An irrevocable election to measure an equity instrument at fair value through other comprehensive income (FVOCI) can be made only if the instrument is held for trading purposes.
- 2A debt instrument can only be classified and measured at amortized cost if the contractual cash flows are solely payments of principal and interest, and the entity's business model is to hold the asset to collect those contractual cash flows.✓
- 3Transaction costs directly attributable to the acquisition of a financial asset are always expensed to profit or loss on initial recognition, regardless of the subsequent measurement model.
- 4An entity's business model for managing financial assets is the sole determinant of whether those assets are measured at amortized cost or at fair value through profit or loss.
Correct answer
A debt instrument can only be classified and measured at amortized cost if the contractual cash flows are solely payments of principal and interest, and the entity's business model is to hold the asset to collect those contractual cash flows.
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