International Financial Reporting Standards_guide.pdf

CHAPTER 33
Financial Instruments: Presentation
(IAS 32)
Note: IAS 32, IAS 39, and IFRS 7 were issued as separate standards but are applied in practice
as a unit because they all deal with the accounting for and disclosure of financial instruments.
33.1 OBJECTIVE
IAS 32 establishes the principles for the classification of financial instruments as financial
assets, financial liabilities, or equity instruments. This classification is an important aspect of
accounting for financial instruments as it drives the recognition and measurement requirements
of IAS 39 and the disclosure requirements of IFRS 7.
IAS 32 also provides guidance for the presentation of financial instruments in the financial
statements, including requirements for offsetting financial assets and financial liabilities.
Additionally, the standard deals with the accounting treatment of treasury shares.
The principles in IAS 32 complement the principles of recognition and measurement in
IAS 39, and disclosure in IFRS 7.
33.2 SCOPE OF THE STANDARD
The standard deals with all types of financial instruments, both recognized and unrecognized,
and should also be applied to contracts to buy or sell a nonfinancial item that can be
settled net as follows:
■ in cash;
■ by another financial instrument; or
■ by exchanging financial instruments, as if the contracts were financial instruments.
Presentation issues addressed by IAS 32 relate to:
■ distinguishing financial liabilities from equity;
■ classifying compound instruments;
■ reporting interest, dividends, losses, and gains; and
■ offsetting of financial assets and liabilities.
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