What is IAS 39 Financial Instruments Recognition and Measurement?

What is IAS 39 Financial Instruments Recognition and Measurement?

IAS 39 Financial Instruments: Recognition and Measurement outlines the requirements for the recognition and measurement of financial assets, financial liabilities, and some contracts to buy or sell non-financial items.

What are the criteria for the derecognition of a financial asset?

A financial asset should be derecognized if either the entity’s contractual rights to the asset’s cash flows have expired or the asset has been transferred to a third party (along with the risks and rewards of ownership).

What are the two categories required by IAS 39 for classification of financial liabilities?

This category has two subcategories:

• Designated. The first includes any financial asset that is designated on initial recognition as one to be measured at fair value with fair value changes in profit or loss.
• Held for trading. The second category includes financial assets that are held for trading.

How are assets and liabilities measured under IAS 39?

IAS 39 requires an entity to recognise a financial asset or liability on its balance sheet only when it becomes a party to the contractual provisions of the instrument. Initial measurement: financial assets and liabilities are initially measured at fair value (discussed in the measurement chapter).

What are the four types of financial assets as per IAS 39?

IAS 39 prescribes rules for accounting and reporting of almost all types of financial instruments. Typical examples include cash, deposits, debt and equity securities (bonds, treasury bills, shares…), derivatives, loans and receivables and many others.

What is derecognition of financial asset?

Derecognition refers to the removal of an asset or liability (or a portion thereof) from an entity’s balance sheet. Derecognition questions can arise with respect to all types of assets and liabilities. This project focuses on financial instruments.

What are the measurement of financial liabilities?

Financial liabilities are generally classified and measured at amortised cost, unless they meet the criteria for classification at fair value through profit or loss.

What is derecognition in accounting?

How are financial instruments measured?

A financial asset or financial liability is measured initially at fair value. Subsequent measurement depends on the category of financial instrument. Some categories are measured at amortised cost, and some at fair value.

What is the most common measure of financial transactions?

Historical Cost – most common measure of financial transactions. Current Value – includes fair value, value in use, fulfillment value and current cost.

Is there a IAS 39 project on derecognition?

The IASB agreed to consider both a com­pre­hen­sive project on dere­cog­ni­tion or all types of assets and li­a­bil­i­ties and also a separate, narrower scope project that would explore the need to revise guidance in IAS 39 Financial In­stru­ments: Recog­ni­tion and Mea­sure­ment in the area of dere­cog­ni­tion of financial in­stru­ments.

When does IAS 39 require recognition of an asset?

Initial recognition. IAS 39 requires recognition of a financial asset or a financial liability when, and only when, the entity becomes a party to the contractual provisions of the instrument, subject to the following provisions in respect of regular way purchases.

What are the requirements for derecognition of financial assets?

IAS 39 contains one set of requirements that apply to the derecognition of all financial assets, from the simple maturity of an instrument to the more complex securitisation transactions.

What does derecognition mean for a financial instrument?

Financial instruments — Derecognition. Background. Derecognition refers to the removal of an asset or liability (or a portion thereof) from an entity’s balance sheet. Derecognition questions can arise with respect to all types of assets and liabilities.