An entity has financial assets in the form of bonds that mature in 10 years with variable interest rates. However, the interest rate is capped at the interest rate 10%. The bond is one of the bonds owned by the entity in a bond portfolio. The entity actively manages the returns on the portfolio. These returns consist of obtaining contractual payments as well as gains and losses from the sale of financial assets. As a result, the entity has financial assets to collect contractual cash flows and sells financial assets to reinvest in higher-yielding financial assets or to better match the durability of the entity. In the past, this strategy resulted in sales activity Repeat and the sale is significant in value. This activity is expected to continue in the future. Requested: Determine the proper classification of the bonds.
An entity has financial assets in the form of bonds that mature in 10 years with variable interest rates. However, the interest rate is capped at the interest rate 10%. The bond is one of the bonds owned by the entity in a bond portfolio. The entity actively manages the returns on the portfolio. These returns consist of obtaining contractual payments as well as gains and losses from the sale of financial assets. As a result, the entity has financial assets to collect contractual cash flows and sells financial assets to reinvest in higher-yielding financial assets or to better match the durability of the entity. In the past, this strategy resulted in sales activity Repeat and the sale is significant in value. This activity is expected to continue in the future.
Requested:
Determine the proper classification of the bonds.
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