Accounting Classification based on Business Model and SPPI

Once the Business Model test or Cash Flow Characteristics test is performed, the classification method needs to be assigned, depending on the outcome of the test. As the first step, accounts that have been assigned the classification through staging or based on election, retain that classification.

For accounts, where the classification is null, the following process assigns the classification:

Table 5-3 The Business Model that assigns the respective classification

Business Model	SPPI Test	Classification
Held to Collect	Y	AMRTCOST
Held to Collect and Sell	Y	FVOCI
Held to Sell	Y	FVTPL
Held to Maturity	Y	AMRTCOST
Available for Sale	Y	FVTPL
Held to Collect	N	FVTPL
Held to Collect and Sell	N	FVTPL
Held to Sell	N	FVTPL
Held to Maturity	N	AMRTCOST
Available for Sale	N	FVTPL

The final process is to optionally select the accounts to be classified under FVTPL or FVOCI. This is done based on the following Rules:

Fair Value option: If the fair value flag is Y, then Classification = FVTPL

Equity Instruments: For Instrument Type = Equities and Business Model = Held to Collect, then Classification = FVOCI.

Note:

If the Classifications for all the accounts are provided as downloads, then the application need not process the same. In such cases, all the Classification related Processes have to be removed from the Stage Determination and Classification Run.