Ind ASs relating to financial instruments

What are the Ind ASs relating to financial instruments?

Financial instruments are primarily governed by three standards as per Ind AS, viz, Ind AS 32, Ind AS 109 and Ind AS 107.

Ind AS 32 defines financial instruments, financial assets, financial liabilities and equity instruments. Ind AS 32 deals with financial instruments from the perspective of an issuer. It primarily addresses the presentation-related issues and provides guidance whether a financial instrument should be considered as a financial asset, a financial liability or an equity instrument. Ind AS 32 also addresses compound instruments that contain both liability and equity components.

Ind AS 109 also deals with the financial instruments albeit from the perspective of the investor. Primarily, it addresses the issues relating to the recognition and measurement of financial assets and the liabilities. Ind AS 109 provides guidance on the classification of financial assets and financial liabilities, recognition and derecognition of the financial instruments, measurement and subsequent measurement of such instruments and the impairment methodology to be followed for financial assets. This Standard also addresses the concepts on hedge accounting and provides guidance as to how a hedging relationship should be accounted for, be it a fair value hedge, a cash flow hedge or a hedge of net investment in foreign operation.

Financial instruments standards also include Ind AS 107 where all the requirements relating to disclosures about the financial instruments including hedge accounting are grouped and given in this standard. The primary objective of Ind AS 107 is to provide guidance on the disclosures that would enable the users of the financial statements to evaluate the significance of financial instruments for the entity’s financial position and performance. This Standard also prescribes disclosures relating to the nature and extent of the risks arising from financial instruments to which the entity is exposed to and how the entity manages those risks.

What is SPPI test?

What is SPPI Test? SPPI test means Solely Payment of Principal and Interest. The SPPI test is performed at the instrument level. So, if the test passes for one, it means the test passes for everyone in respect of that instrument. SPPI test should be passed for an instrument to…

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What are Ind AS accounting standards?

What are Ind AS accounting standards? The Ministry of Corporate Affairs (MCA) on 16th February 2015 notified the Companies (Indian Accounting Standards) Rules, 2015 containing 39 Indian Accounting Standards (Ind ASs). Ind ASs are based on International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). The…

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Roadmap for implementing Ind AS

Roadmap for implementing Ind AS The roadmap for implementing Ind AS in a phased manner is given below. All non-financial companies For companies other than banks, NBFC and Insurance companies: Voluntary Phase 1st April 2015 or thereafter: Voluntary Basis for all companies (with comparatives) Phase I 1st April 2016: Mandatory…

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What is the significance of Ind AS 32?

What is the significance of Ind AS 32 Ind AS 32 is the converged Accounting Standard of IAS 32 Ind AS 32 deals with financial instruments from the perspective of an issuer and provides guidance as to how an entity should present a financial instrument either as a financial asset…

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Ind AS for financial instruments replica of IFRS?

Ind AS for financial instruments replica of IFRS? Are the Ind AS relating to financial instruments an exact replica of its counterpart, viz, IFRS? Ind AS 32 is the converged standard of IAS 32. Ind AS 109 is the converged Ind AS of IFRS 9. Ind AS 107 is the…

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Scopes of the three standards for financial instruments

Scopes of the three standards for financial instruments Are the scopes of all the three standards viz., Ind AS 32, Ind AS 109 and Ind AS 107 similar? Ind AS 32 is the converged standard of IAS 32. Ind AS 109 is the converged Ind AS of IFRS 9. Ind…

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Contract to deal in non-financial item

Contract to deal in non-financial item Is a contract to buy or sell a non-financial item, a financial instrument? A contract to deal with a non-financial item is not a financial instrument. However, there are certain contracts to buy or sell a non-financial item that may be required to be…

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Contract meant for own use

Contract meant for own use Can a written option that results in the delivery of a non-financial item be treated as a financial instrument, as the non-financial item is meant for own use? If the derivative contract is a purchased call option or a future contract to buy a non-financial…

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Difference between forward contract & futures contract

Difference between forward contract & futures contract What is the difference between a forward contract and a futures contract? A forward contract is a derivative instrument between two parties to buy or to sell an asset at a specified future time at a price agreed upon today. A forward contract…

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Difference between futures contract & options contract

Difference between futures contract & options contract What is the basic difference between a futures contract and an options contract? Both futures contract and options contract are known as derivative contracts. In a futures contract, there is an underlying, the notional amount and an expiry date. In the case of…

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Definition of derivative instruments

Definition of derivative instruments Are derivative instruments specifically defined in the standards and if so, where? A derivative instrument is a subset of financial instrument with mainly three characteristics, viz, its value changes in response to a change in the underlying variable, it requires no or low initial net investment…

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