International Financial Reporting Standards_guide.pdf

362 Chapter 33 Financial Instruments: Presentation (IAS 32)
IAS 32 applies to all financial instruments, except:
■ interests in subsidiaries, associates, and joint ventures (covered by, respectively, IAS 27,
Consolidated and Separate Financial Statements; IAS 28, Investments in Associates; and
IAS 31, Joint Ventures);
■ employers’ rights and obligations arising from employee benefit plans (IAS 19,
Employee Benefits);
■ financial instruments within the scope of IFRS 2, Share-Based Payments (if the way in
which a company structures its share-based payment scheme involves the acquisition
of its own shares, for example a share trust, those treasury shares will be in the scope of
IAS 32; judgment will have to be applied on a case by case basis to determine whether
a share-based payment scheme does result in treasury shares);
■ contracts for contingent consideration in a business combination (IFRS 3, Business
Combinations); and
■ insurance contracts and financial instruments within the scope of IFRS 4, Insurance
Contracts (except for derivatives that are embedded in insurance contracts if IAS 39
requires the entity to account for them separately).
33.3 KEY CONCEPTS
33.3.1 A financial instrument is any contract that gives rise to a financial asset in one entity
and a financial liability or equity instrument in another entity.
33.3.2 A financial asset is any asset that is:
■ cash (for example, cash deposited at a bank);
■ an equity instrument of another entity;
■ a contractual right to receive cash or a financial asset (for example, the right of a
debtor);
■ a contractual right to exchange financial instruments under conditions that are potentially
favorable to the entity; or
■ a contract that will or may be settled in an entity’s own equity instruments and is:
– a nonderivative for which the entity is or may be obliged to receive a variable number
of the entity’s own equity instruments; or
– a derivative that will or may be settled other than by the exchange of a fixed amount
of cash or another financial asset for a fixed number of the entity’s own equity
instruments.
Physical assets (for example, inventories and patents) are not financial assets because they do
not give rise to a present contractual right to receive cash or other financial assets.
33.3.3 A financial liability is a contractual obligation to:
■ deliver cash or another financial asset to another entity;
■ exchange financial instruments with another entity under conditions that are potentially
unfavorable to the entity; or
■ a contract that will or may be settled in the entity’s own equity instruments and is:
– a nonderivative for which the entity is or may be obliged to deliver a variable number
of the entity’s own equity instruments; or
– a derivative that will or may be settled other than by the exchange of a fixed amount
of cash or another financial asset for a fixed number of the entity’s own equity
instruments.