The foundation of accounting for financial instruments is based on the requirements of classification, and the requirements for impairment and hedge accounting are based on that classification. The classification of financial instruments determines how they are accounted for and, in particular, how they are measured on an ongoing basis.

IFRS 9 applies one classification approach for all types of financial assets, and two criteria are used to determine how financial assets should be classified and measured:

  • the entity’s business model for managing the financial assets; and
  • the contractual cash flow characteristics of the financial asset (SPPI criterion).

Aptivaa has project accelerator in the form of toolkits that can be used in preliminary SPPI tests and it will help our clients for compliance to IFRS 9 within the stipulated timelines.

We also provide services in helping banks develop frameworks and policies for assessing business models.