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The South African Insurance Industry Survey 2016 | 71

The classification for equity instruments and debt instruments into the principal measurement
categories can be summarised as follows:

Equity No SPPI Yes Business model as-
investment? assessment sessment
Yes
Yes Are the Is business model’s
contractual cash objective to collect
contractual cash flows?
flows solely
Held for Yes No payments of No
trading? FVTPL
principal Are assets in the
No and business model
managed both to
interest? collect contractual cash
flows and for sale?
No

OCI option No
elected?

(Irrevocable)

Yes Yes Amortised
cost*
FVOCI FVOCI
(equity instruments) (debt instruments)* *FVTPL is available to
eliminate or significantly
reduce accounting mismatch

Equity instruments
Many insurers would be required to measure investments in equity instruments at FVPL. In our
view, it is unlikely that insurers would elect the FVOCI category, as the majority of changes in
insurance liabilities will be recognised in profit or loss (in terms of the final insurance contracts
standard).

Debt instruments
The business model for debt instruments is determined at a level that reflects the way groups of
financial assets are managed to achieve a particular business objective. An entity may have more
than one business model for managing financial assets. IFRS 9 states that an entity’s business
model for managing the financial assets is a matter of fact and is typically observable through
particular activities that the entity undertakes to achieve the objectives of the business model.