How does IFRS 9 classify and measure financial assets?

IFRS 9 classifies financial assets into three distinct categories based on the entity’s business model for managing the assets and the contractual cash flow characteristics (the SPPI test):

1. Amortised Cost: Held to collect contractual cash flows consisting solely of principal and interest.
2. Fair Value Through Other Comprehensive Income (FVTOCI): Held to both collect contractual cash flows and sell the asset.
3. Fair Value Through Profit or Loss (FVTPL): The default category for assets that do not meet the criteria of the other two models, including trading portfolios.