Hello, Confused on reclassifying financial assets and could use some help. CFA text states page 14 " IFRS generally prohibits the reclassification of securities into or out of designated at fair value category, and reclassification out of held for trading category is severely restricted." Just took the 2010 CFA mock exam and question 32 on afternoon section has you reclassify available for sale into fair value category to get the right answer. So should we assume that since CFA texts says “generally prohibits” if we get a question on the actual exam to just reclassify AFS into fair value?
I think you are over-analyzing the question. When they ask if you can reclassify, the answer is no, but I think here they are only testing your knowledge on how to record unrealized gain/loss for AFS and trading. I remember reading somewhere that the exam is always right, don’t ever doubt it.
I guess…just seems like the question could go either way. Since the company specifically uses IFRS I would answer no they can’t reclassify. Thus, if the next question asks “if at acquisition all equity securities that were eligible to be designated at fair value were so designated, what would be the amount that contributes to net income” I would not reclassify AFS into fair value because of my answer to question 1. According to mock exams I would be wrong with my answer to the second part…ugh.