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Dear Sir,
I needed some help in understanding Busines Model test and Contractual flow test.What they actually are .
These two are tests to determine whether a debt instrument can be measured at amortised cost . If the tests are both satisfied, then the debt instrument CAN be measured at amortised cost. If not satisfied, then it must be measured at fair value through profit and loss.
But even if they are satisfied, they may still be valued at fair value through profit and loss if, by doing so, it eliminates or significantly reduces a “measurement inconsistency”
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