Classification and Measurement: Limited Amendments to IFRS 9

CLASSIFICATION AND MEASUREMENT: LIMITED AMENDMENTS TO IFRS 9 (PROPOSED AMENDMENTS TO IFRS 9 (2010))
...continued
Example Analysis
However, the entity also monitors the
fair value of the financial assets from
a liquidity perspective to ensure that
the cash amount that would be
realised if the entity needed to sell
the assets would be sufficient to meet
the entity’s liquidity needs in a stress
case scenario.
Paragraphs B4.1.4A–B4.1.4B are added.
In contrast, if an entity holds
financial assets to meet its everyday
liquidity needs and that involves
recurring and significant sales
activity, the objective of the entity’s
business model is not to hold the
financial assets to collect contractual
cash flows.
Similarly, if the entity is required by
its regulator to routinely sell
significant volumes of financial assets
to demonstrate that the assets are
liquid, the entity’s business model is
not to hold financial assets to collect
contractual cash flows. The fact that
the requirement to sell the financial
assets is imposed by a third party
rather than being at the discretion of
the entity is not relevant to the
analysis.
B4.1.4A The entity’s business model for managing the financial assets may be to manage
assets both to collect contractual cash flows and to sell. In other words, the
entity’s key management personnel has made a decision that both collecting
contractual cash flows and selling are fundamental to achieving the objective of
the business model within which the financial assets are held. Compared to the
business model whose objective is to hold financial assets to collect contractual
cash flows, this business model will typically involve greater frequency and
volume of sales. This is because selling financial assets is integral to achieving
the business model’s objective rather than only incidental to it.
B4.1.4B The following are examples of when the entity’s business model may be to
manage assets both to collect contractual cash flows and to sell. This list of
examples is not exhaustive. The examples are not intended to describe all
factors that may be relevant to the assessment of the entity’s business model nor
specify the relative importance of the factors.
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� IFRS Foundation