RECLASSIFICATION

OF FINANCIAL ASSETS
FVPL AC CONDITIONS
• Change in business model
AC FVPL • Prospective application from
reclassification date**
• No restating of gains, losses, and
AC FVOCI interest previously recognized
• Disclosure of change in business
FVOCI AC model

Only debt securities can be

FVOCI FVPL reclassified.

FVPL FVOCI
 FVPL AC
1. FV at reclassification date = new carrying amount
2. Face amount ̶ new carrying amount = premium or discount to be amortized
3. Determine (interpolate) new effective interest rate

Illustration 1:
✓ Acquisition
On January 1, 2019, an entity purchased portfolio of bonds for
P6,000,000 with the business model of managing financial ✓ Change in FV
assets by selling the bonds in short-term to realize fair value
changes. The face amount of bonds is P5,000,000.
✓ Reclassify
First day of the next reporting
On December 31, 2019, fair value of the bonds is P5,500,000.
period after reclassification.
In November 2020, the entity changed its business model into
managing bonds to collect contractual cash flows. The fair Investment in bonds xxx
value of bonds at this date is P5,800,000.
FA-FVPL xxx
On December 31, 2020, fair value of the bonds is P5,200,000.
 FVPL AC
1. FV at reclassification date = new carrying amount
2. Face amount ̶ new carrying amount = premium or discount to be amortized
3. Determine (interpolate) new effective interest rate

Illustration 2: FA-FVPL 5,500,000

On January 1, 2020, an entity purchased portfolio of bonds Cash 5,500,000
for P5,500,000 with the business model of managing
financial assets by selling the bonds in short-term to realize FA-FVPL 300,000
fair value changes. The face amount of bonds is P6,000,000. UGain-FVPL 300,000
On December 31, 2020, the entity changed its business
model into managing bonds to collect contractual cash Inv. in Bonds 5,800,000
flows. The fair value of bonds at this date is P5,800,000. FA-FVPL 5,800,000
 AC FVPL
1. Determine FV at reclassification date
2. FV ̶ previous carrying amount = profit or loss

Illustration 1:
On January 1, 2019, an entity purchased bonds for P4,500,000 ✓ Acquisition
with the business model of managing financial assets by
collecting contractual cash flows. The face amount of bonds is ✓ Amortization and interest collection
P5,000,000. The bonds pay interest annually at December 31. ✓ Reclassify
In October 2019, the entity changed its business model into First day of the next reporting
managing bonds from collecting contractual cash flows to period after reclassification.
realizing gains from fair value changes. The fair value of bonds at
this date is P4,800,000. FA-FVPL xxx
On December 31, 2019, the carrying amount of bond investment Investment in bonds xxx
is P4,700,000 after the discount amortization of P200,000. The Gain on reclassification xxx
fair value of the bonds at this date is P5,500,000.
 AC FVPL
1. Determine FV at reclassification date
2. FV ̶ previous carrying amount = profit or loss

Illustration 2:
Inv. in Bonds 5,500,000
On January 1, 2020, an entity purchased bonds for P5,500,000
with the business model of managing financial assets by
Cash 5,500,000
collecting contractual cash flows. The face amount of bonds is
P5,000,000. The bonds pay interest annually at December 31. Interest Income 100,000
Inv. in Bonds 100,000
In November 2020, the entity changed its business model into
managing bonds from collecting contractual cash flows to
realizing gains from fair value changes. The fair value of bonds at
FA-FVPL 5,100,000
this date is P5,300,000. Loss on Rec. 300,000
Inv. in Bonds 5,400,000
On December 31, 2020, the carrying amount of bond investment
is P5,400,000 after the premium amortization of P100,000. The
fair value of the bonds at this date is P5,100,000.
 AC FVOCI
1. Determine FV at reclassification date
2. FV ̶ previous carrying amount = other comprehensive income
3. Use the same EIR

Illustration 1:
On January 1, 2019, an entity purchased bonds for P5,500,000 with the ✓ Acquisition
business model of managing financial assets by collecting contractual cash ✓ Amortization and interest collection
flows. The face amount of bonds is P6,000,000. The bonds pay interest
annually at December 31. ✓ Reclassify
In October 2019, the entity changed its business model into managing First day of the next reporting
bonds from collecting contractual cash flows only to selling it as well in the period after reclassification.
market. The fair value of bonds at this date is P5,000,000.
On December 31, 2019, the amortized cost of bond investment is 5,800,000
FA-OCI xxx
after the discount amortization of P300,000. The fair value of the bonds at Investment in bonds xxx
this date is P6,150,000. UGain-OCI xxx
On January 1, 2020, the fair value of the bonds is P6,200,000.
 AC FVOCI
1. Determine FV at reclassification date
2. FV ̶ previous carrying amount = other comprehensive income
3. Use the same EIR

Illustration 2:
Inv. in Bonds 3,500,000
On January 1, 2019, an entity purchased bonds for P3,500,000 with Cash 3,500,000
the business model of managing financial assets by collecting
contractual cash flows. The face amount of bonds is P3,800,000. The Inv. in Bonds 100,000
bonds pay interest annually at December 31.
Interest Income 100,000
On December 31, 2019, the entity changed its business model into
managing bonds from collecting contractual cash flows only to FA-FVOCI 3,400,000
collecting contractual cash flows and selling it in the market. The ULoss-OCI 200,000
amortized cost of bond investment is 3,600,000 after the premium Inv. in Bonds 3,600,000
amortization. The fair value of the bonds at this date is P3,400,000.
 FVOCI AC
1. FV at reclassification date = new carrying amount
2. Cumulative gain/loss is eliminated at RD
3. Use the same EIR

Illustration 1: ✓ Acquisition
On January 1, 2019, an entity purchased bonds for P4,600,000 with the ✓ Amortization and interest collection
business model of managing financial assets by collecting contractual
✓ Change in FV
cash flows and selling the asset. The bonds pay interest annually at
December 31. The face amount of bonds is P5,000,000 ✓ Reclassify
In November 2019, the entity changed its business model into managing First day of the next reporting
bonds from collecting contractual cash flows and selling to collecting period after reclassification.
contractual cash flows only. The fair value of bonds at this date is
P5,000,000. Investment in bonds xxx
On December 31, 2019, the amortized cost of bond investment is UGain-OCI xxx
4,800,000 after the discount amortization of P200,000. The fair value of FA-FVOCI xxx
the bonds at this date is P5,300,000.
 FVOCI AC
1. FV at reclassification date = new carrying amount
2. Cumulative gain/loss is eliminated at RD
3. Use the same EIR

Illustration 2: FA-FVOCI 5,600,000

On January 1, 2019, an entity purchased bonds for P5,600,000 with Cash 5,600,000
the business model of managing financial assets by collecting
contractual cash flows and selling the asset. The bonds pay interest Interest Income 200,000
annually at December 31. The face amount of bonds is P5,000,000 FA-FVOCI 200,000
In December 31, 2019, the entity changed its business model into
managing bonds from collecting contractual cash flows and selling to Uloss-OCI 100,000
collecting contractual cash flows only. There is a premium FA-FVOCI 100,000
amortization of P200,000 and the fair value of the bonds on this
date is P5,300,000. Inv. in Bonds 5,400,000
FA-FVOCI 5,300,000
ULoss-OCI 100,000
 FVOCI FVPL
1. FV at reclassification date = new carrying amount
2. Cumulative gain/loss in OCI = profit or loss

Illustration 1: ✓ Acquisition
On January 1, 2019, an entity purchased bonds for P4,200,000 ✓ Amortization and interest collection
with the business model of managing financial assets by collecting
✓ Change in FV
contractual cash flows and selling the asset. The bonds pay interest
annually at December 31. The face amount of bonds is P4,000,000 ✓ Reclassify
In December 31, 2019, the entity changed its business model into First day of the next reporting
realizing gains from fair value changes. The fair value of bonds at period after reclassification.
this date is P3,900,000. The premium amortization is P100,000.
FA-FVPL xxx
ULoss-P/L xxx
FA-FVOCI xxx
ULoss-OCI xxx
 FVOCI FVPL
1. FV at reclassification date = new carrying amount
2. Cumulative gain/loss in OCI = profit or loss

Illustration2:
FA-FVOCI 4,500,000
Cash 4,500,000
On January 1, 2020, an entity purchased bonds for P4,500,000
with the business model of managing financial assets by FA-FVOCI 100,000
collecting contractual cash flows and selling the asset. The Interest Income 100,000
bonds pay interest annually at December 31. The face amount
of bonds is P5,000,000
FA-FVOCI 100,000
In November 2020, the entity changed its business model into UGain-FVOCI 100,000
realizing gains from fair value changes. The fair value of bonds
at this date is P4,800,000. FA-FVPL 4,700,000
On December 31, 2020, the fair value of the bonds is P4,700,000 FA-FVOCI 4,700,000
and the discount amortization is P100,000.
UGain-FVOCI 100,000
UGain-FVPL 100,000
 FVPL FVOCI
1. FV at reclassification date = new carrying amount
2. Determine (interpolate) new effective interest rate

Illustration 1: ✓ Acquisition
On January 1, 2019, an entity purchased bonds with face amount of ✓ Change in FV
P3,000,000 for P3,300,000. The entity’s business model is to realize
gains from fair value changes. The bonds pay interest annually at ✓ Reclassify
December 31.
First day of the next reporting
In December 31, 2019, the entity changed its business model into period after reclassification.
collecting contractual cash flows and selling the asset. The fair value
of bonds at this date is P3,600,000. FA-FVOCI xxx
FA-FVPL xxx
 FVPL FVOCI
1. FV at reclassification date = new carrying amount
2. Determine (interpolate) new effective interest rate

Illustration 2:
On January 1, 2020, an entity purchased bonds with face amount FA-FVPL 4,000,000
of P3,500,000 for P4,000,000. The entity’s business model is to Cash 4,000,000
realize gains from fair value changes. The bonds pay interest
annually at December 31. ULoss-FVPL 300,000
In December 31, 2020, the entity changed its business model into FA-FVPL 300,000
collecting contractual cash flows and selling the asset. The fair
value of bonds at this date is P3,700,000. FA-FVOCI 3,700,000
FA-FVPL 3,700,000
 1. FV at reclassification date = new carrying amount
FVPL AC 2. Face amount ̶ new carrying amount = premium or discount to be amortized
3. Determine (interpolate) new effective interest rate

1. Determine FV at reclassification date

AC FVPL 2. FV ̶ previous carrying amount = profit or loss

1. Determine FV at reclassification date

AC FVOCI 2. FV ̶ previous carrying amount = other comprehensive income
3. Use the same EIR

1. FV at reclassification date = new carrying amount

FVOCI AC 2. Cumulative gain/loss is eliminated at RD
3. Use the same EIR

1. FV at reclassification date = new carrying amount

FVOCI FVPL 2. Cumulative gain/loss in OCI = profit or loss

1. FV at reclassification date = new carrying amount

FVPL FVOCI 2. Determine (interpolate) new effective interest rate