1.Business model
There are three types: Collect contract cash flow;Collect contract cash flow + ** to earn the difference;Other.
2.Contract cash flow characteristics
There are two types: in line with credit characteristics;Does not meet the characteristics of credit.
The classification of financial assets is a permutation and combination of these three business models and two contractual cash flow characteristics.
Of course, according to mathematical logic, three business models and two cash flow characteristics should combine six types of financial assets, but in reality there are only three categories, because some of them are combined.
Category 1: Financial assets measured at amortized cost
If the business model is (only for the purpose of collecting contractual cash flows) and the contractual cash flow characteristics are (with perfect credit characteristics), they fall into this category.
The most common is to buy bonds, collect interest every period, collect the principal at maturity, and try to earn a stable income during the holding period.
Category 2: Financial assets measured at fair value through other comprehensive income
If the business model is (i.e., both collecting contract cash flow and making the difference), and the contract cash flow characteristics are (i.e., having perfect credit characteristics), then it falls into this category
To put it bluntly, the purchase is still bonds, but the purpose of holding is not as simple as the first one, only trying to recover the interest during the holding period and the principal at maturity, but also thinking about the opportunity to make the difference.
Of course, for the vast majority of ordinary enterprises, this classification is extremely rare, and it is mostly seen in banks and insurance institutions, because the vast majority of ordinary enterprises will not set up an investment department to choose the time to earn the difference in the price of bonds, otherwise it will be considered to be not doing business.
There are two difficulties here:
Why do you need to do it at fair value?
Because ** is one of its holding purposes, as long as it involves **, the holder must pay attention to the market price, so it is necessary to use fair value to bookkeeping.
Why should other comprehensive income be included?
Because the fair value of a bond changes with the interest rate, which fluctuates from day to day, the fair value changes very frequently, and the fair value of the bond reverts to face value as the maturity date approaches.
That is, the fair value will jump up and down during the holding process, but the cumulative impact is not large (just like the figure below, the yellow line - fair value fluctuates up and down, and when it expires, it tends to be consistent with the blue line - face value).
If the fair value fluctuations in the holding process are recorded in the income statement, it will inevitably cause the profit to increase by 3 million this month, 5 million less next month, and 4 million more next month, and the cumulative fair value change is almost 0 at the final maturity.
Is it fun to make profits like this?
Therefore, in order not to pollute the income statement, the fair value changes during the holding period are included in other comprehensive income, and then transferred to profit and loss when the income is the same.
Category 3: Financial assets measured at fair value through profit or loss
All the other collocations ( are all classified in this category, these four combinations may be dizzy, but you don't need to remember these, just remember one sentence:
If the cash flow does not conform to the perfect credit characteristics or the business model is not to receive contractual cash flows, it is a financial asset measured at fair value through profit or loss;
While there are four situations that fall into this category, there is only one that is primarily involved:The purpose of holding is purely for **, and the contractual cash flow does not meet the perfect credit characteristics.
The most typical example is buying**.
Don't think that the people who buy ** are small scattered like you and me, and there are many companies that buy **, and even some companies' profits are supported by buying and selling.
Since the core purpose is to be the first to pay attention to fair value, so fair value is used for accounting.
Moreover, considering that the purpose of holding such financial assets is to make money from buying and selling transactions, and the fluctuation of stock prices is almost 0 when the maturity date is approaching, and the cumulative fair value change is infinitely close to the face value (what is the best speculation), so the subsequent fair value changes are directly included in the current profit or loss, rather than other comprehensive income.
Summary
Finally, a quick summary: