The Hold and Sell Business Model is a necessary condition to classify financial assets at amortised costs or at fair value through other comprehensive income in the Business Model test.
The test is about whether the asset is part of a group or portfolio that is being managed within a business model whose objective is to collect contractual cash flows from the non-equity financial asset (which results in classification of measurement at Amortized Cost), or to both collect contractual cash flows from the non-equity financial asset and sell the non-equity financial asset (which results in classification of measurement at fair value through other comprehensive income (FVOCI)). Otherwise, the asset is measured at fair value through profit or loss (FVPL).
Key characteristics in the Hold to Collect Business Model are:
- Collecting cash flows and selling assets are both integral,
- Sales are made as part of managing everyday liquidity needs, maintaining a particular interest yield profile or matching the duration of financial assets and liabilities
Examples in IFRS 9 are found here: IFRS 9, B4.1.4C