Difference between amortised cost & held-to-maturity

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.

Ind AS Accounting Standards

Effective Rate of Interest – EIR

What is SPPI test?

Are RBI circulars relevant for ECL computation as per Ind AS 109?

What is a Financial instrument?

Is there a choice to designate as FVTPL?

What are treasury shares and how are these presented

Contract to deal in non-financial item

Can a corporate entity still follow settlement date accounting?

What does Interest represent?

Gains and losses on assets measured at FVOCI

Separately accounting for an embedded derivative

Derecognition of a financial asset

Foreign currency risk in a firm commitment as a fair value hedge

Treatment of transaction costs

Derecognise financial assets/financial liabilities retrospectively

Modification of contractual cash flows

Own use exemption as per the Accounting Standard

Accounting treatment for FVOCI Instruments

What is the concept of effective interest method?

What is a hybrid contract?

First-time adoption while classifying a financial instrument

SPPI test & business model objective test

Current standards for financial instruments as per AS?

Effective interest Rate

Contract is settled through the entity’s own equity instrument

Financial asset categorised as FVOCI

What is an embedded derivative?

Impairment model for different categories of financial assets

Ind ASs relating to financial instruments

FVOCI (equity instruments) and FVOCI (debt instruments)

Classification of derivative instruments

Contract meant for own use

Reclassification of a financial asset

Debt instrument measured at FVOCI

Change in contractual cash flows

Loss allowance as per Ind AS 109

Ind AS for financial instruments replica of IFRS?

Contractual cash flows & effective interest rate

Long-term financial liability classified as FVTPL

Credit adjusted effective interest rate

Effective rate of interest during the first-time adoption

Consequence of not de-recognising an asset after the sale

Designation of contracts deal a non-financial item on first time adoption

Recognition of financial instruments on first-time adoption

Gains and losses on a financial instrument

Gains and losses from liabilities designated as FVTPL

Measurement categories for financial assets

Difference between time value of money and modified time value of money