The investors’ key management personnel determine the business model, as defined in Ind AS 24 ‘Related Policy Disclosures’. The following factors should be considered while determining the business model objective:
- The business model does not depend on the management’s intention and ability for an individual instrument.
- The business model objective should not be determined on an instrument by instrument basis, but at a higher level of aggregation.
- Higher level of aggregation does not mean that the test should be performed at the entity / enterprise level, I.e., at the portfolio or sub-portfolio investments level.
- The entity may purchase or originate portfolio of mortgage loans with the objective of collecting contractual cash flows and another portfolio of loans with the objective of selling them for realizing short-term profits. An entity can have multiple portfolios each with different business model objective and hence each of the portfolio being classified differently depending upon the set of objective criteria.