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

RECLASSIFICATION AS PER IFRS 9

After the introduction of IFRS 9, many of the erstwhile provisions of IAS 39 were deleted and the amendments made to IAS 39 and IFRS 7 in October 2008 relating to reclassification has lost its significance. As per IFRS 9, reclassification is allowed only when an entity changes its business model for managing financial assets. If an entity reclassifies financial assets then it shall apply the reclassification prospectively from the reclassification date. The entity shall not restate any previously recognized gains, losses or interest.

When an entity reclassifies a financial asset so that it is measured at fair value, its fair value is determined at the reclassification date. Any gain or loss arising from a difference between the previous carrying amount and fair value is recognized in profit or loss. When the reclassification is measured at amortized cost, its fair value at the reclassification date becomes its new carrying amount.

On reclassification a gain or loss on a financial asset that is measured at amortized cost and is not part of a hedging relationship shall be recognized in profit or loss through the amortization process.

Reclassification date

The first day of the first reporting period following the change in business model that results in an entity reclassifying financial assets.

Examples of situations where reclassification is made

Reclassification of financial assets is required if the objective of the entity’s business model for managing ...