Accounting for Investments, Volume 2: Fixed Income Securities and Interest Rate Derivatives—A Practitioner's Guide

ACCOUNTING FOR FIXED INCOME SECURITIES CLASSIFIED AS AVAILABLE-FOR-SALE

As per IFRS

Para 45 of IAS 39 provides for the classification of financial assets into the following categories:

• Fair value through profit and loss (FVPL);
• Held-to-maturity (HTM);
• Available-for-sale (AFS);
• Loans and receivables (LAR).

Investments in debt securities are classified as either fair value through profit and loss or as available-for-sale securities, or as held-to-maturity investments.

As per the accounting standards, available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as:

• Loans and receivables;
• Held-to-maturity investments; or
• Financial assets at fair value through profit or loss.

Thus bonds that are not designated as financial assets at fair value through profit or loss are categorized as available-for-sale instruments. Also investments in bond instruments that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured should not be designated as at fair value through profit or loss and such instruments are designated as available-for-sale securities.

Amendment made through IFRS 9

IFRS 9 is the first part of Phase 1 of the IASB’s project to replace IAS 39. Financial Instruments: Classification and Measurement, which is Phase 1 and was published in July 2009, contained proposals for both assets and liabilities within the scope of IAS 39. An entity shall apply ...