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.