RECLASSIFICATION DEBT INVESTMENT

(Change in the business model)

1. From FVPL to AC

On January 1, 2020, an entity purchased a portfolio of bonds in accordance with

the business model of managing financial assets by selling the bonds in the short
term or in order to realize fair value changes. The acquisition cost is P6,000,000
and the face amount of the bonds is P5,000,000.

During 2020, no securities were sold and on December 31, 2020, the fair value of
the bond is P5,500,000.

In December 2021, the entity acquired another entity that manages commercial
bonds and has a business model that holds the bonds in order to collect
contractual cash flows.

On December 31, 2021, the fair value of the bonds is P5,200,000.

2020
Jan. 1 Debt Investment at FVPL 6,000,000
Cash 6,000,000

Dec. 31 Unrealized Loss on DI at FVPL 500,000

Debt Investment at FVPL 500,000

Fair value, Dec. 31, 2020 P 5,500,000

Carrying amount (6,000,000)
Unrealized Loss P 500,000

2021
Dec. 31 Unrealized Loss on DI at FVPL 300,000
Debt Investment at FVPL 300,000

Fair value, Dec. 31, 2021 P 5,200,000

Carrying amount (5,500,000)
Unrealized Loss P (300,000)

2022
Jan. 1 Debt Investment at AC 5,200,000
Debt Investment at FVPL 5,200,000
2. From AC to FVPL

On January 1, 2020, an entity purchased P5,000,000 face value bonds for

P4,500,000 in accordance with the business model of managing financial asset
by collecting contractual cash flows. The bonds pay interest annually on
December 31.

In December 2020, the objective of the entity’s business model for managing the
bonds has changed from collecting contractual cash flows to realizing gains. On
this date, the carrying amount of the bond investment is P4,700,000, after
recording the effective amortization of discount of P200,000. On January 1, 2021,
the fair value of the bond investment is P5,500,000.

2020
Jan. 1 Debt Investment at AC 4,500,000
Cash 4,500,000

2021
Jan. 1 Debt Investment at AC 800,000
Gain on Reclassification of DI 800,000

Fair Value of Debt Investment, Jan. 1, 2021 P5,500,000

Carrying Amount 4,700,000
Gain P 800,000

1 Debt Investment at FVPL 5,500,000

Debt Investment at AC 5,500,000
3. From Amortized Cost to FVOCI

On January 1, 2020, an entity purchased bonds with face amount of P6,000,000

for P5,500,000. The entity’s business model of managing financial asset is
collecting contractual cash flows composed of principal and interest. The bonds
pay interest annually every December 31.

On December 31, 2020, the entity’s business model for managing financial asset
has changed from collecting contractual cash flows to collecting contractual cash
flows and selling the asset in the open market. The amortized cost of the bonds
on December 31, 2020 is P5,800,000 after recording discount amortization of
P300,000. On January 1, 2021, the fair value of the bonds is P6,200,000.

2020
Jan. 1 Debt Investment at AC 5,500,000
Cash 5,000,000

2021
Jan. 1 Debt Investment at FVOCI 5,800,000
Debt Investment at AC 5,800,000

1 Fair Value Adjustment – DI at FVOCI 400,000

Unrealized Gain/Loss on DI at FVOCI 400,000
4. From FVOCI to AC

On January 1, 2020, an entity purchased bonds with face amount of P5,000,000

for P4,600,000. The entity’s business model of managing financial asset is
collecting contractual cash flows and selling the asset. The bonds pay interest
annually every December 31.

On December 31, 2020, the business model for managing financial asset has
changed from collecting contractual cash flows and selling the asset to collecting
contractual cash flows only. The amortized cost of the bonds on December 31,
2020 is P4,800,000 after recording discount amortization of P200,000. The fair
value on December 31, 2020 is P5,300,000. On January 1, 2021, the fair value of
the bonds did not change.

2020
Jan. 1 Debt Investment at FVOCI 4,600,000
Cash 4,600,000

Dec. 31 Fair Value Adjustment on DI at FVOCI 500,000

Unrealized Gain/Loss on DI at FVOCI 500,000

Fair Value, Dec. 31, 2020 P5,300,000

Carrying Amount (4,800,000)
Cumulative Unrealized Gain/Loss P 500,000

2021
Jan. 1 Debt Investment at AC 5,300,000
Debt Investment at FVOCI 5,300,000

1 Unrealized Gain/Loss on DI at FVOCI 500,000

Fair Value Adjustment on DI at FVOCI 500,000
5. From FVPL to FVOCI

On January 1, 2020, an entity purchased bonds with face amount of P3,000,000

for P3,300,000. The entity’s business model of managing financial asset is to
realize fair value changes. The bonds pay interest annually every December 31.

On December 31, 2020, the entity’s business model for managing financial asset
has changed from realizing fair value changes to collecting contractual cash
flows and selling the asset in the open market. The fair value of the bonds on
December 31, 2020 is P3,600,000. On January 1, 2021, the fair value did not
change.

2020
Jan. 1 Debt Investments at FVPL 3,300,000
Cash 3,300,000

Dec. 31 Debt Investment at FVPL 300,000

Unrealized Gain on DI at FVPL 300,000

Fair Value, Dec. 31 P3,600,000

Carrying Amount (3,300,000)
Unrealized Gain on DI at FVPL P 300,000

2021
Jan. 1 Debt Investment at FVOCI 3,600,000
Debt Investment at FVPL 3,600,000
6. From FVOCI to FVPL

On January 1, 2020,an entity purchased bonds with face amount of P4,000,000

for P4,200,000. The entity’s business model of managing financial asset is
collecting contractual cash flows and selling the asset. The bonds pay interest
annually every December 31.

On December 31, 2020, the entity’s business model for managing financial asset
has changed from collecting contractual cash flows and selling the asset to
realizing fair value changes. On this date, the fair value of the bonds is
P3,900,000 and the premium amortization is P100,000. The fair value did not
change on January 1, 2021.

2020
Jan. 1 Debt Investment at FVOCI 4,200,000
Cash 4,200,000

Dec. 31 Unrealized Gain/Loss on DI at FVOCI 200,000

Fair Value Adjustment on DI at FVOCI 200,000

Fair Value, Dec. 31 P3,900,000

Carrying Amount (P4,200,000 – P100,000) (4,100,000)
Cumulative Unrealized Gain (Loss) P (200,000)

2021
Jan. 1 Debt Investment at FVPL 3,900,000
Fair Value Adjustment on DI at FVOCI 200,000
Debt Investment at FVOCI 4,100,000

1 Unrealized Loss on DI at FVPL 200,000

Unrealized Gain/Loss on DI at FVOCI 200,000