· Chapter 13, Problem 11 QP Chapter 12- Chapter 13 A Bookmark Show ail StepS Pro
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· Chapter 13, Problem 11 QP Chapter 12- Chapter 13 A Bookmark Show ail StepS Problem IFRS 9 allows financial assets with a predictable cash flow to be measured at amortized cost, subject to an impairment test, if the firm's business model is to hold them to collect cash flows from interest and principal payments. Given that reliance on manager intent is a shifting sand upon which to base a measurement approach (Section 7.2.1), and that management determines the firm's business model, why would a standard setter who wishes to minimize opportunistic manager actions allow the accounting to depend on the firm's business model? 1QP 2QP vnmeasurement aprach (Section 7 2 1), and that management detemines> 3QP 4Q0P 5QP 6QP Step-by-step solution 7QP 8QP 9QP There is no solution to this problem yet. Get help from a Chegg subject expert 100P 11QP 12QP ASK AN EXPERT 13QP 14QP 150PExplanation / Answer
The business model test is a necessary condition to classify loans or receivables at amortised cost or fair value through other comprehensive income (FVOCI).
Business models are generally two types:
1) One where in the objective is to collect contractual cash flows or
2) Collecting contracting cash flows and to sell.
If it doesn’t fit under the two methods accounting is done through fair value through profit and loss account(FVTPL).
The judgement involving selection of an appropriate business model involves three basic steps:
IFRS has allowed entities to identify their business models based on their predictable cash flows since it is matter of entities activities which differs from entity to entity and cannot be asserted commonly for all entities. Companies classify assets in different ways and the intentions, conditions vary from entity to entity which in turn determine the incidental sales to the company out of the assets.
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