IAS 32 Financial Instruments: Presentation (2024)

IAS 32 specifies presentation for financial instruments. The recognition and measurement and the disclosure of financial instruments are the subjects of IFRS 9 or IAS 39 and IFRS 7 respectively.

For presentation, financial instruments are classified into financial assets, financial liabilities and equity instruments. Differentiation between a financial liability and equity depends on whether an entity has an obligation to deliver cash (or some other financial asset).

However, exceptions apply. When a transaction will be settled in the issuer’s own shares, classification depends on whether the number of shares to be issued is fixed or variable.

A compound financial instrument, such as a convertible bond, is split into equity and liability components. When the instrument is issued, the equity component is measured as the difference between the fair value of the compound instrument and the fair value of the liability component.

Financial assets and financial liabilities are offset only when the entity has a legally enforceable right to set off the recognised amounts, and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

In April 2001 the International Accounting Standards Board (Board) adopted IAS32 Financial Instruments: Disclosure and Presentation, which had been issued by the International Accounting Standards Committee in 2000. IAS32Financial Instruments: Disclosure and Presentationhad originally been issued in June 1995 and had been subsequently amended in 1998 and 2000.

The Board issued a revised IAS 32 in December 2003 as part of its initial agenda of technical projects. This revised IAS 32 also incorporated the guidance contained in related Interpretations (SIC‑5 Classification of Financial Instruments‑Contingent Settlement Provisions, SIC‑16 Share Capital‑Reacquired Own Equity Instruments (Treasury Shares) and SIC‑17 Equity—Costs of an Equity Transaction). It also incorporated guidance previously proposed in draft SIC Interpretation D34 Financial Instruments—Instruments or Rights Redeemable by the Holder.

In December 2005 the Board amended IAS32 by relocating all disclosures relating to financial instruments to IFRS7Financial Instruments: Disclosures. Consequently, the title of IAS32 changed toFinancial Instruments: Presentation.

In February 2008 IAS32 was changed to require some puttable financial instruments and obligations arising on liquidation to be classified as equity. In October 2009 the Board amended IAS32 to require some rights that are denominated in a foreign currency to be classified as equity. The application guidance in IAS32 was amended in December 2011 to address some inconsistencies relating to the offsetting financial assets and financial liabilities criteria.

In May 2017 when IFRS17Insurance Contractswas issued, it amended the treasury share requirements to provide an exemption in specific circ*mstances.

Other Standards have made minor consequential amendments to IAS32. They includeImprovements to IFRSs(issued May2010),IFRS10Consolidated Financial Statements(issued May2011),IFRS11Joint Arrangements(issued May2011),IFRS13 Fair Value Measurement(issued May2011),Presentation of Items of Other Comprehensive Income(Amendments to IAS1) (issued June2011),Disclosures—Offsetting Financial Assets and Financial Liabilities(Amendments to IFRS7) (issued December 2011),Annual Improvements to IFRSs 2009–2011 Cycle(issued May2012),Investment Entities(Amendments to IFRS10, IFRS12 and IAS27) (issued October 2012), IFRS9Financial Instruments(Hedge Accounting and amendments to IFRS9, IFRS7 and IAS39) (issued November 2013), IFRS15Revenue from Contracts with Customers(issued May2014), IFRS9Financial Instruments(issued July 2014), IFRS16Leases(issued January 2016),Annual Improvements to IFRS Standards 2015–2017 Cycle(issued December2017),Amendments to References to the Conceptual Framework in IFRS Standards(issued March 2018) and Amendments to IFRS 17 (issued June 2020).

IAS 32 Financial Instruments: Presentation (2024)

FAQs

IAS 32 Financial Instruments: Presentation? ›

IAS 32 specifies presentation for financial instruments. The recognition and measurement and the disclosure of financial instruments are the subjects of IFRS 9 or IAS 39 and IFRS 7 respectively. For presentation, financial instruments are classified into financial assets, financial liabilities and equity instruments.

What is a financial instrument IAS 32? ›

Key definitions [IAS 32.11]

Financial instrument: a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial asset: any asset that is: cash. an equity instrument of another entity.

Which standard deals with the presentation of financial instruments? ›

IAS 32 Financial Instruments: Presentation outlines the accounting requirements for the presentation of financial instruments, particularly as to the classification of such instruments into financial assets, financial liabilities and equity instruments.

Which of the following are not classified as financial instruments under IAS 32 financial instruments presentation? ›

The following are examples of items that are not financial instruments: intangible assets, inventories, right-of-use assets, prepaid expenses, deferred revenue, warranty obligations (IAS 32.

What is accounting standard 32 financial instruments disclosure? ›

An entity should disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the reporting date.

What is a financial instrument presentation? ›

For presentation, financial instruments are classified into financial assets, financial liabilities and equity instruments. Differentiation between a financial liability and equity depends on whether an entity has an obligation to deliver cash (or some other financial asset). However, exceptions apply.

What are examples of financial instruments? ›

Common examples of financial instruments include stocks, exchange-traded funds (ETFs), mutual funds, real estate investment trusts (REITs), bonds, derivatives contracts (such as options, futures, and swaps), checks, certificates of deposit (CDs), bank deposits, and loans.

What are the 3 main categories of financial instruments? ›

There are typically three types of financial instruments: cash instruments, derivative instruments, and foreign exchange instruments.

What are the criteria for offsetting IAS 32? ›

The two basic requirements of IAS 32 are that offsetting is applied if, and only if, an entity: currently has a legally enforceable right to set-off the recognised amounts; and. intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

How to measure financial instruments? ›

A financial asset is measured at fair value through profit or loss (FVTPL) unless it is measured at amortised cost or at fair value through other comprehensive income (FVTOCI).

What are the 8 financial instruments? ›

Glossary:Financial instruments
  • monetary gold and SDR, F.
  • currency and deposits, F.
  • debt securities, F.
  • loans, F.
  • equity and investment fund shares or units, F.
  • insurance, pension and standardised guarantees, F.
  • financial derivatives and employee stock options, F.
  • other accounts payable/ receivable.
Nov 13, 2023

What is an example of a puttable instrument? ›

An example would be an open ended mutual fund, which gives unit holders the right to redeem their interests in the enterprise at any time for an amount of cash equal to their proportionate share of the net asset value of the entity.

What counts as a financial instrument? ›

A financial instrument refers to any type of asset that can be traded by investors, whether it's a tangible entity like property or a debt contract. Financial instruments can also involve packages of capital used in investment, rather than a single asset.

What are the disclosures required for reporting of financial instruments? ›

The two main categories of disclosures required by IFRS 7 are: information about the significance of financial instruments. information about the nature and extent of risks arising from financial instruments.

Which of the following must be disclosed for most financial instruments? ›

Both carrying value (amount) and fair value must be disclosed for most financial instruments (when it is practicable to estimate fair value).

What are examples of non-financial instruments? ›

Examples of non-financial assets include tangible assets, such as land, buildings, motor vehicles, and equipment, as well as intangible assets, such as patents, goodwill, and intellectual property.

Which should be classified as financial instrument? ›

Financial instruments are classified as financial assets or as other financial instruments. Financial assets are financial claims (e.g., currency, deposits, and securities) that have demonstrable value.

Why is warranty not a financial instrument? ›

Similarly, items such as deferred revenue and most warranty obligations are not financial liabilities because the outflow of economic benefits associated with them is the delivery of goods and services rather than a contractual obligation to pay cash or another financial asset."

What is the financial instrument code? ›

ISO 10962, known as Classification of Financial Instruments (CFI), is a six-letter-code used in the financial services industry to classify and describe the structure and function of a financial instrument (in the form of security or contract) as part of the instrument reference data.

References

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