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BSP Allows Reclassification of Financial Assets

10.24.2008

The Monetary Board (MB), in its meeting held on 23 October 2008 approved the guidelines allowing financial institutions to reclassify financial assets from categories measured at fair value to those measured at amortized cost. This reclassification is consistent with the October 2008 amendments to International Accounting Standards (IAS) 39 and International Financial Reporting Standards (IFRS) 7 issued by the International Accounting Standards Board (IASB) in light of the extra-ordinary circumstances in the world’s financial market.

Financial institutions (FI) may now reclassify their investments in debt and equity securities from the Held for Trading (HFT) or Available for Sale (AFS) categories to the Held to Maturity (HTM) or the Unquoted Debt Securities Classified as Loans (UDSCL) until 31 December 2008.  Reclassifications done before 01 November 2008 may be based on 01 July 2008 fair values. However, reclassifications done on or after 01 November 2008 shall be based on fair values as of the date of the reclassification. 

The Monetary Board’s approval of the guidelines ensures that the BSP continues to be aligned with international accounting standards. Furthermore, the reclassification is a move towards maintaining confidence in financial markets taking full cognizance of the extra-ordinary global situation.