Uncertainty in global and domestic economies with rising interest rates and inflation is expected to continue.

Entities are taking actions to manage their exposures to these risks. 

These actions may differ from an entity’s previous expectations regarding how it was going to manage its financial assets. These may have implications on the measurement and classification of financial assets.

ASIC’s 30 June 2023 focus areas for financial reporting feature financial assets classification as one of the areas that may be impacted by the current environment. That is, whether they are appropriately measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss.

Financial assets classification: What you need to know


The business model for managing financial assets impacts the classification and measurement of financial assets. Judgement is required to determine whether an entity's actions give rise to a change in business model for existing assets, a new business model for newly acquired or originated assets, or no change. Changes in business model are infrequent under AASB 9 Financial instruments.  


Fair value considerations

Volatility in local and global markets may impact assumptions underlying valuations of financial instruments. This includes the impact of increasing interest rates on fair value measurement, including for those financial instruments measured at amortised cost as their fair value is disclosed in the financial statements.


In this Reporting Update, we highlight:

  • business model assessment for financial assets
  • the implications when financial assets are managed differently from expectations
  • the accounting when there is a change in business model
  • fair value considerations.