Under the ‘hold to collect and sell’ business model, the objective is to both collect the contractual cash flows and sell the financial asset. In contrast to the ‘hold to collect’ business model, sales are integral rather than incidental, and consequently, this business model typically involves a greater frequency and volume of sales.
Only financial assets that meet the SPPI test and are held in a ‘hold to collect and sell’ business model can be classified at fair value through other comprehensive income for debt. One example would be government or corporate bonds that are held with the dual objective of holding those bonds to earn interest and selling those bonds before their maturity in order to generate cash for investment or liquidity purposes.
It is worth noting that this business model could also apply to trade receivables in cases where an entity has a practice of factoring subsequent to initial recognition. In these cases, further analysis would be required in order to determine whether the factoring arrangement constitutes a sale and if so whether a ‘hold to collect and sell’ business model or indeed one of the ‘other’ business models is more appropriate.« Go to IFRS Jargon