Question

Entity A has the following debt investment classified as a Financial Assets measured at Amortised Cost:

·       Amortised Cost at 31 Dec 2017 = $10,000

·       Fair Value at 1 Jan 2018 = $11,500

On 31 Dec 2015, Entity A's business model changes and the instrument is reclassified at Fair Value through P/L.

What is the amount of Financial Assets after reclassification on reclassification date?

Entity A has the following debt investment classified as Fair Value through P/L:

·       Fair Value at 31 Dec 2016 = $20,000

·       Fair Value at 31 Dec 2017 = $21,000

·       Fair Value at 1 Jan 2018 = $21,500

On 31 Dec 2017, Entity A's business model changes and the instrument is reclassified at Amortised Cost.

What is the carrying amount of Financial Assets after reclassification on reclassification date?

Answer 1

a.   Entity A's business model changes and the instrument is reclassified at Fair Value through P/L. Therefore amount of Financial Assets after reclassification on reclassification date is its fair value i.e. 11500

Explanation - Recognised at fair value and difference between fair value and closing amortised cost recognized inProfit and loss

b.  

Entity A's business model changes and the instrument is reclassified at Amortised Cost.

Therefore

carrying amount of Financial Assets after reclassification on reclassification date is 21000

Explanation - Closing fair value becomes new amortised cost gross opening carrying amount .