Accounting for Reclassification of Financial Asset - Ind AS - Indian Accounting Standards - Companies Law

Accounting for Reclassification of Financial Asset Reclassification To/From To Amortised Cost Method [ACM] To Fair Value through Other Comprehensive Income [FVTOCI] To Fair Value Through Profit or Loss [FVTPL] From ACM ~ No Change ~ It is measured at Fair Value on reclassification date. Any gain or loss arising from difference between the previous amortised cost of the financial asset and fair value is recognised in OCI. Example Bonds for Rs.1L reclassified as FVTOCI. Fair Value on reclassification is Rs.90,000. JE Bonds at FVTOCI Dr Rs.90,000 OCI (loss on reclassification) Dr Rs.10,000 To Bonds at Amortised Cost Rs.1,00,000 It is measured at fair value on reclassification date. Any gain or loss arising from difference between the previous amortised cost of the financial asset and fair value is recognised in P L. Example Bonds for Rs.1L reclassified as FVTPL. Fair Value on reclassification is Rs.90,000. JE Bonds at FVTPL Dr Rs.90,000 P L (loss on reclassification) Dr Rs.10,000 To Bonds at Amortised Cost Rs.1,00,000 From FVTOCI The financial asset is measured at fair value on reclassification date. However, cumulative gain or loss previously recognised in other comprehensive income (OCI) is removed from equity and adjusted against fair value of financial asset at reclassification date. As a result, the financial asset is measured at reclassification date as if it had always been measured at amortised cost. This adjustment affects OCI but does not affect profit or loss and therefore, is not a reclassification adjustment. Example Bonds for Rs.1L reclassified as Amortised Cost. Fair Value on reclassification is Rs.90,000 and Rs.10,000 loss was recognized in OCI till date, JE Bonds at FVTOCI Dr Rs.10,000 To OCI (loss on reclassification) Rs.10,000 9Being loss recognized in OCI now reverse prior to reclassification) Bonds at Amortised Cost Dr Rs.10,000 To FVTOCI Rs.10,000 (Being bonds reclassified from FVTOCI to Amortised cost) ~ No Change ~ The Financial Asset continues to be measured at Fair Value on reclassification date. Fair value gain/loss is recognized in P L. And transfer any cumulative balance existing in fair value reserve OCI A/c to P L A/c. Example Bonds for Rs.1L reclassified as FVTPL. Fair Value on reclassification is Rs.90,000. JE P L (Loss on reclassification) Dr. Rs.10,000 To OCI (Loss on reclassification) Rs.10,000 Bonds at FVTPL Dr. Rs.10,000 To Bonds at FVTOCI Rs.10,000 From FVTPL It is measured at fair value on reclassification date and this fair value becomes the new gross carrying amount. Effective interest rate is computed based on this new gross carrying amount. Any gain or loss arising from difference between the previous amortised cost of the financial asset and fair value is recognised in profit or loss. Example - Bonds for Rs.1L reclassified as Amortised Cost. Fair Value on reclassification is Rs.90,000. JE Bonds at Amortised Cost Dr. Rs.90,000 Loss on reclassification Dr. Rs.10,000 To Bonds at FVTPL Rs.1,00,000 It is continues to be measured at fair value on reclassification date. And Fair value gain/loss is recognized in P L. Example - Bonds for Rs.1L reclassified as FVTOCI. Fair Value on reclassification is Rs.90,000. JE Bonds at FVTOCI Dr Rs.90,000 OCI (loss on reclassification) Dr Rs.10,000 To Bonds at FVTPL Rs.1,00,000 ~ No Change ~