CFM21880 - IFRS 9: reclassification of financial assets and liabilities

For those entities applying IFRS or FRS 101 with a period of account beginning before 1 January 2018 refer to IAS 39 for the recognition and measurement of financial instruments at CFM21520+

Financial Assets

When, and only when, a company changes its business model for managing financial assets (CFM21840) it shall reclassify all affected financial assets.

Reclassification should be applied prospectively from the reclassification date. The company shall not restate any previously recognised gains, losses or interest already recognised.

Reclassifications between amortised cost and FVTPL

If a company reclassifies a financial asset out of amortised cost into FVTPL the fair value is measured at the reclassification date. Any gain or loss arising from a difference between the previous amortised cost of the financial asset and the fair value is recognised in profit or loss.

If a company reclassifies a financial asset out of FVTPL into the amortised cost category the fair value at the reclassification date becomes the gross carrying amount with the effective interest rate calculated on this amount.

Reclassifications between amortised cost and FVTOCI

If a company reclassifies a financial asset out of amortised cost into FVTOCI the fair value is measured at the reclassification date. Any gain or loss arising from a difference between the previous amortised cost of the financial asset and the fair value is recognised in other comprehensive income. The effective interest rate is not amended.

If a company reclassifies a financial asset out of FVTOCI into the amortised cost category, the financial asset is reclassified at its fair value at the reclassification date. Any cumulative gains or losses previously recognised in other comprehensive income are removed from equity and adjusted against the fair value of the financial asset. The effective interest rate is not amended.

Reclassifications between FVTPL and FVTOCI

If a company reclassifies a financial asset out of FVTPL and into FVTOCI the asset continues to be recognised at fair value and the effective interest rate is calculated on the fair value at the reclassification date as though this is the date of initial recognition.

If a company reclassifies a financial asset out of FVTOCI and into FVTPL the asset continues to be recognised at fair value and any cumulative gains or losses previously recognised in other comprehensive income are reclassified from equity to profit or loss.

Financial Liabilities

A company shall never reclassify a financial liability.