Wiley International Trends in Financial Reporting under IFRS: Including Comparisons with US GAAP, Chinese GAAP, and Indian GAAP

CHAPTER 22

FINANCIAL INSTRUMENTS: PRESENTATION (IAS 32)

1. OBJECTIVE

1.1 This Standard applies to all types of financial instruments, except those specifically excluded (see 1.2) and to contracts to buy or sell a nonfinancial item that can be settled

• In cash,
• By another financial instrument, or
• By exchanging financial instruments, as if the contracts were financial instruments.

1.2 This Standard does not apply to interest in subsidiaries (International Accounting Standard [IAS] 27, Consolidated and Separate Financial Statements), joint ventures (IAS 31, Interests in Joint Ventures), associates (IAS 28, Investments in Associates), employee benefit plans (IAS 19, Employee Benefits), share-based payments (International Financial Reporting Standard [IFRS] 2, Share-Based Payment), insurance contracts (IFRS 4, Insurance Contracts), or contracts for contingent consideration in a business combination (IFRS 3, Business Combinations).

2. SYNOPSIS OF THE STANDARD

A summary of this Standard, which aims at establishing principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities, is presented next.

2.1 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. A financial instrument is a liability if there is a contractual obligation to deliver cash or other financial assets; it is equity if it evidences a residual interest in ...