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In Intermediate Accounting by Valix

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37 views

In Intermediate Accounting by Valix

Uploaded by

hdgsvdbnf
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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In Intermediate Accounting by Valix, reclassifications among financial asset categories (Amortized Cost,

Fair Value through Profit or Loss (FVPL), and Fair Value through Other Comprehensive Income (FVOCI))
are addressed with specific accounting treatments for each type of reclassification. Here is a summary of
these reclassifications:

### 1. Reclassification from Amortized Cost to FVPL

- **Carrying Amount Adjustment:** The financial asset is remeasured at fair value on the reclassification
date.

- **Recognition of Gains or Losses:** The difference between the carrying amount and the fair value is
recognized in profit or loss.

- **Subsequent Measurement:** The financial asset is subsequently measured at fair value, with
changes in fair value recognized in profit or loss.

### 2. Reclassification from FVPL to Amortized Cost

- **Fair Value as New Carrying Amount:** The fair value on the reclassification date becomes the new
carrying amount of the financial asset.

- **Effective Interest Rate:** The new effective interest rate is determined based on the fair value at the
reclassification date.

- **Subsequent Measurement:** The financial asset is subsequently measured at amortized cost using
the new effective interest rate.

### 3. Reclassification from FVPL to FVOCI

- **Fair Value as New Carrying Amount:** The fair value on the reclassification date becomes the new
carrying amount.

- **Recognition of Changes in Fair Value:** Subsequent changes in fair value are recognized in other
comprehensive income (OCI), rather than in profit or loss.

### 4. Reclassification from FVOCI to FVPL


- **Carrying Amount Adjustment:** The financial asset is remeasured at fair value on the reclassification
date.

- **Recognition of Cumulative Gains or Losses:** The cumulative gain or loss previously recognized in
OCI is reclassified to profit or loss.

- **Subsequent Measurement:** The financial asset is subsequently measured at fair value, with
changes in fair value recognized in profit or loss.

### 5. Reclassification from Amortized Cost to FVOCI

- **Fair Value as New Carrying Amount:** The fair value on the reclassification date becomes the new
carrying amount.

- **Recognition of Gains or Losses:** The difference between the carrying amount and fair value is
recognized in OCI.

- **Subsequent Measurement:** The financial asset is subsequently measured at fair value, with
changes in fair value recognized in OCI.

### 6. Reclassification from FVOCI to Amortized Cost

- **Fair Value as New Carrying Amount:** The fair value on the reclassification date becomes the new
carrying amount.

- **Effective Interest Rate:** The new effective interest rate is determined based on the fair value at the
reclassification date.

- **Recognition of Cumulative Gains or Losses:** The cumulative gain or loss previously recognized in
OCI is amortized over the remaining life of the asset using the new effective interest rate.

- **Subsequent Measurement:** The financial asset is subsequently measured at amortized cost using
the new effective interest rate.

### General Points

- **Reclassification Conditions:** Reclassifications are only permitted if there is a change in the business
model for managing financial assets.

- **Consistency with Business Model:** The reclassification should align with the new business model's
objective for holding financial assets.
- **Disclosure Requirements:** Entities must disclose the reason for the reclassification and its effects
on the financial statements.

These reclassification treatments ensure that the financial reporting accurately reflects the entity's
current intentions and management strategy for financial assets.

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