Accounting Standard (AS) 30
Financial Instruments:
Recognition and Measurement
Limited Revisions to
AS 2,
AS 11 (revised 2003),
AS 21,
AS 23,
AS 26,
AS 27
AS 28
AS 29
OBJECTIVE
Recognising and measuring financial
assets, financial liabilities and some
contracts to buy or sell non-financial
items.
Requirements for presenting
information about financial
instruments
DEFENITIONS
Derivative
(a) its value changes in response to the change
in a specified interest rate, financial instrument
price, commodity price, foreign exchange rate,
index of prices or rates, credit rating or credit
index, or other variable, provided in the case of a
non-financial variable that the variable is not
specific to a party to the contract
(b) it requires no initial net investment or an
initial net investment that is smaller than would
be required for other types of contracts that
would be expected to have a similar response to
changes in market factors
(c) it is settled at a future date.
RECOGNITION
An entity should recognise a
financial asset or a financial
liability on its balance sheet
when, and only when, the entity
becomes a party to the
contractual provisions of the
instrument.
DERECOGNITION
Three conditions.
The part comprises only specifically identified cash
flows from a financial asset (or a group of similar
financial assets).
The part comprises only a fully proportionate (pro
rata) share of the cash flows from a financial asset
(or a group of similar financial assets)
The part comprises only a fully proportionate (pro
rata) share of specifically identified cash flows
from a financial asset (or a group of similar
financial assets).
Measurement
When a financial asset or financial liability is recognised
initially, an entity should measure it as follows:
(a) A financial asset or financial liability at fair value through
profit or loss should be measured at fair value on the date of
acquisition or issue.
(b) Short-term receivables and payables with no stated
interest rate should be measured at original invoice amount
if the effect of discounting is immaterial.
(c) Other financial assets or financial liabilities should be
measured at fair value plus/ minus transaction costs that are
directly attributable to the acquisition or issue of the
financial asset or financial liability
ACCOUNTING STANDARD
31:
FINANCIAL
INSTRUMENTS
:PRESENTATIONS
OBJECTIVE
1. The objective of this Standard is to
establish principles for presenting financial instruments as
liabilities or equity
for offsetting financial assets and financial liabilities.
classification of financial instruments, from the perspective
of the issuer into:
financial assets,
financial liabilities
equity instruments;
classification of related interest,dividends, losses and
gains;
The circumstances in which financial assets and financial
liabilities should be offset.
2. The principles in this Standard complement the principles
for recognising and measuring
DEFENITIONS
A financial instrument is any contract
that gives rise to a financial asset of
one entity and a financial liability or
equity instrument of another entity.
In this Standard, ‘contract’ and
‘contractual’ refer to an agreement
between two or more parties that has
clear economic consequences that the
parties have little
In this Standard, ‘entity’ includes
individuals, partnerships, incorporated
bodies, trusts and government agencies.
Financial Assets and Financial
Liabilities
LIABILITIES ASSET
(a) trade accounts (a) trade accounts
payable receivable
(b) bills payable (b) bills receivable
(c) loans payable (c) loans receivable
(d) bonds payable (d) bonds receivable
The promissory note- (e) deposits and
the promissory note advances.
issuer The promissory note
-the promissory note
holder
A financial guarantee is a contractual
right of the lender to receive cash
from the guarantor, and a
corresponding contractual obligation
of the guarantor to pay the lender
Equity Instruments
non-puttable equity shares,
some types of preference shares
warrants
Derivative Financial Instruments
Derivative Primary
financial instruments
instruments receivables
financial options, payables
futures and equity instrument
forwards
interest rate swaps
currency swaps
Contracts to buy or sell non-financial
items do not meet the definition of a
financial instrument because the
contractual right of one party to
receive a non-financial asset or service
and the corresponding obligation of the
other party do not establish a present
right or obligation of either party to
receive, deliver or exchange a financial
asset
Presentation
The issuer of a financial instrument
should classify the instrument, or its
component parts, on initial
recognition as a financial liability, a
financial asset or an equity
instrument in accordance with the
substance of the contractual
arrangement and the definitions of
a financial liability, a financial asset
and an equity instrument.
Accounting Standard (AS) 32
Financial Instruments:
Disclosures
OBJECTIVE
. The objective of this Standard is
to require entities to provide disclosures in their
financial statements that enable users to
evaluate:
(a) the significance of financial instruments for the
entity’s financial position and performance; and
(b) the nature and extent of risks arising from
financial instruments to which the entity is
exposed during the period and at the reporting
date, and how the entity manages those risks.
2. The principles in this Accounting Standard
complement the principles of AS 30 and AS 31
DISCLOSURES IN BALANCE
SHEET
Categories of financial assets and
financial liabilities
Financial assets or financial liabilities
at fair value through profit or loss
Reclassification
Derecognition
Collateral
Allowance account for credit losses
Compound financial instruments with
multiple embedded derivatives
Defaults and breaches
OTHER DISCLOSURES
Accounting policies
Hedge accounting
Fair value
RISKS
QUALITATIVE QUANTITATIVE
the exposures to risk Credit risk
and how they arise; Liquidity risk
its objectives, policies
Market risk
and processes for
managing the risk and
the methods used to
measure the risk
any changes in (a) or
(b) from the previous
period.