Ias 39
Summary of IAS 39:
IAS 39: Financial Instruments: Recognition and Measure was first adopted by European Union for annual periods beginning on or after January 1st 2005. The goal was to provide principles for recognising and measuring financial assets, financial liabilities (including derivative financial instruments) and some specific contracts to buy and sell non-financial items.
Initial Recognition: Financial asset or financial liability is only recognised on balance sheet when and only when, an entity becomes a party to contractual provisions of the instruments.
Initial Measurement: At initial recognition, the financial asset or liability is measured at fair value. Directly attributable transaction cost are added to fair value for financial asset or financial liability not at fair value through profit or loss.
Subsequent measurement of financial assets: IAS 39 classifies financial assets into following categories to determine their subsequent measurement criteria.
(a) Initially recognized financial assets at fair value through profit or loss are subsequently measured at fair value without deducting any transaction cost.
(b) Loans and receivables and held for maturity investments are measured at amortized cost using effective interest rate method
(c) Available for sale assets are measured at cost if fair value cannot be reliably measured.
Subsequent measurement of financial liabilities: All financial liabilities are measured at cost using effective interest method. Exceptions to this rule are financial liability at fair value through profit or loss, financial liability arising from transfer of financial asset that does not qualify for derecognition, financial guarantee contracts, and loans at below market rate.
Derecognition: A financial liability is derecognized when the contract obligation is discharged or cancelled or expires. Derecognition of financial asset applies only when the contractual right to the cash flow from the asset expires or when the
IAS 39: Financial Instruments: Recognition and Measure was first adopted by European Union for annual periods beginning on or after January 1st 2005. The goal was to provide principles for recognising and measuring financial assets, financial liabilities (including derivative financial instruments) and some specific contracts to buy and sell non-financial items.
Initial Recognition: Financial asset or financial liability is only recognised on balance sheet when and only when, an entity becomes a party to contractual provisions of the instruments.
Initial Measurement: At initial recognition, the financial asset or liability is measured at fair value. Directly attributable transaction cost are added to fair value for financial asset or financial liability not at fair value through profit or loss.
Subsequent measurement of financial assets: IAS 39 classifies financial assets into following categories to determine their subsequent measurement criteria.
(a) Initially recognized financial assets at fair value through profit or loss are subsequently measured at fair value without deducting any transaction cost.
(b) Loans and receivables and held for maturity investments are measured at amortized cost using effective interest rate method
(c) Available for sale assets are measured at cost if fair value cannot be reliably measured.
Subsequent measurement of financial liabilities: All financial liabilities are measured at cost using effective interest method. Exceptions to this rule are financial liability at fair value through profit or loss, financial liability arising from transfer of financial asset that does not qualify for derecognition, financial guarantee contracts, and loans at below market rate.
Derecognition: A financial liability is derecognized when the contract obligation is discharged or cancelled or expires. Derecognition of financial asset applies only when the contractual right to the cash flow from the asset expires or when the