When would a company classify accounts receivable as Fair Value Through Profit or Loss (FVTPL)?

A company would classify accounts receivable as Fair Value Through Profit or Loss (FVTPL) when it intends to sell the receivable. This classification aligns with the financial reporting framework that allows entities to recognize and measure financial assets based on the management’s intention regarding how those assets will be managed and their cash flows will be realized. If the company plans to sell the receivable rather than hold it to collect cash flows, classifying it as FVTPL captures the expected variability in the asset's value, reflecting changes in fair value in profit or loss.

In contrast, classifying an account receivable as FVTPL is not appropriate when the company is simply collecting cash flows from it, as this indicates a hold strategy where fair value changes would not need immediate recognition. Similarly, if the receivable is characterized as stable or is being used as collateral, these factors do not indicate an intention to actively manage or trade the asset, thus making FVTPL classification unsuitable. The focus on the intention to sell the receivable clarifies why this specific choice is the correct approach within the context of financial accounting standards.