Reclass of FVTPL to L/R

Dear Billy

Good day!

Now I am studying on the topic HKAS 39, on the Reclass out of FVTPL.

According to the standard, it should originally be a non-derivative FA classified as HFT as the purpose is for selling in near term, to reclass to L/R,
1, it should be no more trading intent
2, it should satisfied the definition of a L/R
3, the entity should have the intent and ability to hold it for the foreseeable future or to maturity.

If the company has the intent to hold to maturity, why it is not classified as HTM? (I think 1 of the reason is that such FA may not be quoted originally, please advise if my understanding is incorrect)

Yes. It may also be an asset with no fixed maturity date.


Would you please provide some example on the reclass from FVTPL to L/R?

This is more common for financial institutions. Examples, a bank originated loans to various customers with the intention to sell the packaged loans (to syndicate after origination). Due to the current market situation, the syndication fails and the loan is retained by the bank, with the intention to hold it for the long term.


Can a debt originally held for factoring in near term be 1 of the example, since it's cash flows can be determined reliabily although non-quoted?

Technically yes.


Now the due to the significant decrease in the value of such debt, the company may opt to reclass it as L/R rather than FVTPL.

Reclassification from FVTPL to L/R should be based on the change of trading intent instead of the amount of loss. To reclassify from FVTPL to L/R, any loss should be recognised in P/L.


Thanks in advance for your help.

Regards
Kelvin




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