Difference between amortised cost & held-to-maturity

What is the difference between amortised cost classification as per Ind AS 109 and held-to-maturity classification as per IAS 39?

A financial asset shall be measured at amortised cost if both of the following conditions are met:

  1. the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
  2. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Amortised cost classification as per Ind AS 109 has similarities to the category ‘Held-to-Maturity’ (HTM) investments as per IAS 39. HTM investments are those which are bought with the intention and ability to hold such investments till the maturity period of the instrument. However, amortised cost classification as per Ind AS 109 are those financial assets that are classified based on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the same. A financial asset will be classified as measured at amortised cost only if both the conditions are met, viz, (a) financial asset is held with the business model whose objective is to hold the financial asset in order to collect contractual cash flows; and (b) the contractual terms of the financial assets give rise on specified basis to cash flows that are solely payments of principal and interest on the principal amount outstanding. As per IAS 39, there were quite a few exceptions to the rule for classification as held to maturity. The exceptions to the rule provide specific cases of sales happening before the maturity date that do not necessarily meet the classification criteria. While some of these exceptions are still retained in the new requirements, conceptually, the classification criteria have changed as noted above and hence the exceptions are also modified accordingly. As per the new requirements, the business model objective of the entity has to be determined at a portfolio or sub-portfolio level and not on an instrument-by-instrument approach, which was also the criterion specified as per IAS 39.

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