Classification and Measurement: Limited Amendments to IFRS 9

CLASSIFICATION AND MEASUREMENT: LIMITED AMENDMENTS TO IFRS 9 (PROPOSED AMENDMENTS TO IFRS 9 (2010))
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Instrument Analysis
In such cases, the entity must assess
the contractual cash flows against the
cash flows on an instrument that is
identical in all respects except for the
tenor of the interest rate to determine
if the are not payments represent
solely of principal and interest on the
principal amount outstanding. For
example, in assessing a constant
maturity bond with a five-year term
that pays a variable rate that is reset
semi-annually periodically but always
reflects a five-year maturity does not
result in contractual cash flows that
are payments of principal and interest
on the principal amount outstanding.
That is because the interest payable in
each period is disconnected from the
term of the instrument (except at
origination)., an entity considers the
contractual cash flows on an
instrument that resets semi-annually
to a semi-annual interest rate but is
otherwise identical.
Paragraph B4.1.21A is added. Paragraph B4.1.26 is amended. New text is underlined.
Contractually linked instruments
...
B4.1.21A A tranche is deemed to satisfy B4.1.21(a) if it would otherwise have payments
that are solely principal and interest but is prevented from meeting this
requirement solely because it is prepayable contingent on a prepayment
occurring in the underlying pool.
...
B4.1.26 If the holder cannot assess the conditions in paragraph B4.1.21 at initial
recognition, the tranche must be measured at fair value through profit or loss.
If the underlying pool of instruments can change after initial recognition in
such a way that the pool may not meet the conditions in paragraphs B4.1.23 and
B4.1.24, the tranche does not meet the conditions in paragraph B4.1.21 and
must be measured at fair value through profit or loss. However, if the
underlying pool includes instruments that are collateralised by assets that do
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� IFRS Foundation