CFM16210 - Accounting for financial instruments: IAS 32 and IAS 39: classification of financial assets and financial liabilities

Classification

The classification of financial assets is dealt with at CFM16115 onwards.

IAS 39 recognises two classifications of financial liabilities:

• Financial liabilities at fair value through profit or loss (FVTPL); and,
• Others, measured at amortised cost using the effective interest method.

As with financial assets, the first category is divided into two sub-categories:

• Designated - a financial liability that is designated by the company as a liability at fair value through profit or loss upon initial recognition; and
• Held for trading (HFT) - a financial liability classified as held for trading, such as an obligation for securities borrowed in a short sale, which have to be returned in the future.

The IASB issued an amendment to IAS 39 to restrict the option to designate both financial liabilities and financial assets as FVTPL - see CFM16120a.

Financial liabilities that are designated as hedged items are subject to the hedge accounting requirements - see CFM16275.