Illustrating the application of the business model and SPPI tests
Amortised cost or FVOCI possible FVPL mandatory
Bank deposits repayable on
demand, where interest, if payable,
is at a fixed or floating market rate
Investments in common shares
where the holder does not
designate the asset as FVOCI
Trade receivables requiring payment
only of fixed amounts on fixed dates
Investments in mandatorily
redeemable preferred shares and
puttable instruments (or instruments
issued by entities having a limited
life) such as mutual-fund units
where non-payment of dividends
is not a breach of contract or the
holder has no claim for a fixed
amount in bankruptcy
Full recourse loans or investments
in debt securities that require only
fixed payments on fixed dates
Self-standing derivative financial
assets such as purchased options,
swaps and forward contracts
Full recourse floating-rate loans
requiring fixed payments on fixed
dates of principal and bearing
interest at a floating market rate
(such as the BA rate) where the
interest rate is for a period that is
the same as the interest-rate reset
period (e.g., the interest rate is reset
every three months based on the 3
month BA rate)
Floating-rate loans where the
interest rate is for a period that does
not correspond to the interest reset
period (e.g., interest is reset every
3 months based on the 6 month BA
rate) and the impact on cash flows
is significant
Non-recourse loans (i.e., those
where recourse is limited to specific
assets) where at initial recognition
the lender has an economic
exposure to the underlying asset’s
value and cash flows that is
consistent with a basic lending
arrangement
Non-recourse loans where at
initial recognition the lender has
an economic exposure to the
underlying asset’s value and cash
flows greater than that of a basic
lender
Trade receivables, loans and
investments in debt securities,
having the attributes described
above but that can be prepaid,
subject to meeting certain criteria
Fixed or floating rate loans including
terms where payments are based
on factors such as equity or
commodity prices, unless the terms
are not genuine or their effect is de
minimis
PSAK 71 - Financial Instruments 9