MORNBFI Vol. 1 - Planters Development Bank

APP. Q-2011.12.31recognition, an FI shall measure INMES atcost. A gain or loss arising from the changein fair value of the INMES shall berecognized in profit or loss when the securityis derecognized or impaired.An FI shall assess each time it preparesits financial statements whether there is anyobjective evidence that an INMES isimpaired.If there is objective evidence that animpairment loss has been incurred on anINMES, the amount of impairment loss ismeasured as the difference between thecarrying amount of the security and theestimated future cash flows discounted atthe current market rate of return for a similarfinancial instrument. Such impairment lossshall not be reversed.For Securities at Fair Value through Profitor Loss and Available-for-Sale, an FI isrequired to book the mark-to-marketvaluation on a daily basis. However, an FImay opt to book the mark-to-marketvaluation every end of the month:Provided, That an adequate mechanism isin place to determine the daily fair valuesof securities.An FI shall recognize an investment indebt or equity security on its balance sheetwhen, and only when, the FI becomes aparty to the contractual provisions of thefinancial instrument. A regular way purchaseor sale of financial assets shall berecognized and derecognized, as applicableusing trade date accounting or settlementdate accounting. The method used isapplied consistently for all purchases andsale of financial assets that belong to thesame category.Sec. 4. Reclassifications 1a. An FI shall not reclassify a securityinto or out of the Fair Value through ProfitLoss category while it is held.b. If, as a result of a change in intentionor ability, it is no longer appropriate toclassify a debt security as HTM, it shall bereclassified as Available-for-Sale andremeasured at fair value, and the differencebetween its carrying amount and fair valueshall be accounted for in accordance withSection 3.c.1.c. Whenever sales or reclassificationsof more than an insignificant amount ofHTM investments do not meet any of theconditions in Section 3.a, any remainingHTM investments shall be reclassified asAvailable-for-Sale. On such reclassification,the difference between the carrying amountand fair value shall be accounted for inaccordance with Section 3.c.1.d. If a reliable measure becomesavailable for an INMES, it shall bereclassified as Available-for-Sale andremeasured at fair value, and the differencebetween its carrying amount and the fairvalue shall be accounted for in accordancewith Section 3.c.1.e. If, as a result of a change in intentionor ability, or because the two (2) precedingfinancial years’ referred to in Section 3.ahave passed, it becomes appropriate to carrythe debt security at amortized cost(i.e, HTM) rather than at fair value(i.e, Available-for-Sale), the fair valuecarrying amount of the security on that datebecomes its new amortized cost. Anyprevious gain or loss on that debt securitythat has been recognized directly inequity in accordance with Section 3.c.1shall be amortized to profit or loss overthe remaining life of the HTM using theeffective interest method. Any differencebetween the new amortized cost andmaturity amount shall also be amortizedover the remaining life of the security usingthe effective interest method, similar to theamortization of a premium and a discount.If the security is subsequently impaired, anygain or loss that has been recognized1The guidelines governing the reclassification of financial assets between categories in accordance with the provisions of theOctober 2008 amendments to PAS39 and PFRS7 are shown in Annex A.Q RegulationsAppendix Q-20 - Page 6Manual of Regulations for Non-Bank Financial Institutions