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Sir it is said that for a debt instrument to be held under amortize cost, it must two tests which are :
1) The Business model test: this I understand as it means the debt is held to collect to cash flow rather than to sell the asset .
2) Contractual cash flow characteristic test ? Please, could you explain this for or is it the opposite of the 1st ?
Thanks in advance
IFRS9 paragraph 4 says it, I believe:
“Business model test: The objective of the entity’s business model is to hold the financial asset in order to collect the contractual cash flows rather than to realise a gain (by selling before the contracted maturity date) as the instrument value changes
Cash flow characteristics test: The contract terms of the financial asset specify dates for the cash flows and those flows are solely payments of principal and interest on the instrument amount outstanding.”
Do you need any more than that?
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