CFM INDOSUEZ Wealth Management - 2020 Annual Report

61 Themethod of accounting for debt instruments resulting from determining the business model and performing the SPPI test can be presented in the formof the diagram below: Debt instruments at amortised cost Debt instruments aremeasured at amortised cost if they are eligible for the hold to collect business model and if they fulfil the SPPI criteria. They are recorded on the settlement date and their initial valuation also includes accrued coupons and transaction costs. This category of financial assets is subject to impairment under the conditions described in the paragraph on Provisioning for credit risk. Debt instruments at fair value through other comprehensive income recyclable to income Debt instruments are measured at fair value through other comprehensive income recyclable to income if they are eligible for the Hold to Collect and Sell business model and if they fulfil the SPPI criteria. They are recorded on the trade date and their initial valuation also includes accrued coupons and transaction costs. The amortisation of any premiums / discounts and transactioncostson fixed incomesecurities is recognised in profit or loss. These financial assets are subsequently measured at fair value and changes in fair value are recorded in other comprehensive income recyclable to income, offset against balancesoutstanding (excludingaccrued interest). In the event of sale, these changes are transferred to income. This category of financial instruments is subject to impairment under the conditions described in the paragraph on Provisioning for credit risk (with no impact on the fair value recorded in the balance sheet). Debt instruments at fair value through profit or loss Debt instruments are measured at fair value through profit or loss in the following cases: - The instruments are classified in portfolios consisting of financial assets held for trading or whose main purpose is their sale; Financial assets held for trading are assets acquired or generated by the business primarily for the purpose of selling them in the short termor as part of a portfolio of instruments jointly managed for the purpose of obtaining a profit related to short-term price fluctuations or an arbitraging margin. Although contractual cash flows are collected during the time that CFM IndosuezWealth Group holds the assets, the collection of these contractual cash flows is not essential but incidental. - Debt instruments that do not meet the “SPPI” test criteria. This is particularly the case for UCITS; - Financial instruments classified in portfolios for which CFM IndosuezWealth chooses valuation at fair value inorder to reduceadifference inaccounting treatment in the income statement. In this case, these instruments are designated at fair value throughprofit or loss. Financial assetsmeasured at fair value through profit or loss are initially recognised at fair value, excluding transaction costs (which are directly recorded in profit or loss) and including accrued interest. They are subsequentlymeasuredat fair valueandchanges in fair value are recognised in income, under net banking income, offset against balances outstanding. No impairment is recorded on these financial assets. Debt instruments measured at fair value through profit or loss by default are recorded on the settlement date. Debt instruments designated at fair value through profit or loss are recorded on the trade date. Business model Debt instruments collecte Hold to collect and sell Other / Sell SPPI test Passed Amortised cost Fair value through other comprehensive income recyclable to income Fair value through profit or loss Not passed Fair value through profit or loss Fair value through profit or loss Fair value through profit or loss (SPPI test)