Which one of the following criteria must be met to qualify as a “pass-through arrangement” when applying the derecognition principles in IFRS 9?
A. The entity has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts from the original financial asset
B. The entity is required, for the period in which the financial asset is held, to maintain the financial asset in an account maintained by a qualified custodian
C. The entity may temporarily sell or pledge the financial asset to ultimately be transferred to the eventual recipient only if the entity maintains cash collateral in amounts equal to the fair value of that asset
D. The entity must remit any cash flows collected from the financial asset on behalf of the eventual recipients within 3-months of it being collected
A pass-through arrangement, as defined by IFRS 9, refers to a structure where an entity essentially acts as a conduit for cash flows, passing them through without assuming credit risk. To qualify as a "pass-through arrangement" under IFRS 9's derecognition principles, the key criterion is that the entity has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts from the original financial asset. Therefore, the correct answer reflecting this characteristic is:
A. The entity has no obligation to pay amounts to the eventual recipients unless it collects equivalent amounts from the original financial asset.
