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Hi,
According to the following technical article,
it is written that “IFRS 9 also prohibits the recycling of the gains and losses on FVTOCI investments to P/L on disposal.”
However in the March/June 2017 Q 3 part b it is written that
‘When these financial assets are derecognised, the cumulative gains and losses previously recognised in OCI are reclassified from equity to profit or loss.’
My question is which treatment is correct?
Thank you very much
Hi,
Are the two scenarios identical? There may be subtle differences in each scenario that give rise to the different treatments. Have a look, let me know and then we can investigate it further.
Thanks
Hi,
Thank you.
I think the difference in treatment is the fact that in Q 3 it is written that the financial asset is aligned with the FVTOCI business model. In BPP study text, it is written that
“gains and losses on financial asset held within a business model whose objective is achieved by both collecting cash flows and selling financial asset, and which must be classified at FVTOCI, must be re-classified to profit and loss when the asset is sold”
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