Under IFRS
Debt securities initially recognized as Available-for-Sale can be reclassified to Held-to-maturity if a change in intention or ability has occurred. When a security is reclassified:
· The fair value carrying amount of the security at the time of reclassification becomes its new amortized cost.
· Any previous gain/loss that was recognized in Other Comprehensive Income is amortized to profit and loss over the remaining life of the security using the effective interest rate method.
· Any difference between the new amortized cost of the security and its maturity value is amortized over the remaining life of the security using the effective interest rate method.
Any Financial asset can be reclassified to historical cost (when no reliable fair value measure is available).If a reliable measure of fair value becomes available, the financial assets must be reclassified to the available for sale category.
· Changes in fair value are recognized in Other Comprehensive Income (if reclassified to the available for sale category).
Under US.GAAP
i. When a security which is initially recognized as Available-for-Sale is reclassified to the held for trading category:
· The cumulative amount of gains/losses previously recognized in Other Comprehensive Income is recognized in the Income Statement on the date of transfer.
ii. When a debt security is transferred from availablefor-sale to Held-to-maturity category:
· The cumulative amount of gains/losses previously recognized in Other Comprehensive Income is amortized over the remaining life of the security.
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