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IFRS Seminar IAS 32 Financial Instruments: Presentation Overview of session • Financial instruments should be presented as assets, liabilities or equity in the statement of financial position. • Compound financial instruments should be split between their liability and equity components. • Interest, dividends, gains and losses should be presented in a manner consistent with the classification of the related financial instrument. • Financial assets and financial liabilities can only be offset in limited circumstances 3 Review of key concepts A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. An equity instrument is any contract that evidences a residual interest in the assets of another 4 Review of key concepts A financial asset is any asset that is cash, an equity instrument of another entity, a contract that (subject to certain conditions) will or may be settled in the entity’s own equity instruments or a contractual right: • To receive cash or another financial asset from another entity; or • To exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity. 5 Review of key concepts A financial liability is any liability that is a contract that (subject to certain conditions) will or may be settled in the entity’s own equity instruments or a contractual obligation: • To deliver cash or another financial asset to another entity; or • To exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity 6
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