What is one of the recognition criteria for Accounts Receivable at amortized cost?

The recognition criteria for Accounts Receivable at amortized cost hinges on the business model under which the financial asset is held. When it is stated that the financial asset is held within a business model to collect cash flows, it emphasizes the intention of the entity to manage the asset with the primary goal of receiving payments from the debtor over time. This is critical because it aligns with the measurement approach of amortized cost, where cash flows consist of principal and interest payments anticipated to be received, rather than selling the asset at fair value.

Entities focus on collecting cash flows from accounts receivable as part of their ongoing operations, and this reflects the underlying economic reality of the transaction. When a business operates with this model, it demonstrates a clear strategy regarding how financial assets are to be managed, distinguishing it from other classifications that might involve selling or trading assets for profit. This approach is fundamental to meeting the criteria for recognizing accounts receivable at amortized cost under the relevant accounting standards. Other options do not align with this core principle and thus do not fit the criteria necessary for recognizing accounts receivable in this manner.