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Educational Material on Ind AS 32 Financial Instruments and Presentation

Ind AS 32 Financial Instruments and Presentation : Ind AS 32 Financial Instruments: Presentation outlines the accounting requirements for the presentation of financial instruments, particularly as to the classification of such instruments into financial assets, financial liabilities and equity instruments. The standard also provide guidance on the classification of related interest, dividends and gains/losses, and when financial assets and financial liabilities can be offset. Ind AS 32 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005.

History of  Ind AS 32

September 1991 Exposure Draft E40 Financial Instruments
January 1994 E40 was modified and re-exposed as Exposure Draft E48 Financial Instruments
June 1995 The disclosure and presentation portion of E48 was adopted as Ind AS 32 Financial Instruments: Disclosure and Presentation
1 January 1996 Effective date of Ind AS 32 (1995)
December 1998 Ind AS 32 was revised by Ind AS 39, effective 1 January 2001
17 December 2003 Revised version of Ind AS 32 issued by the IASB
1 January 2005 Effective date of Ind AS 32 (2003)
18 August 2005 Disclosure provisions of Ind AS 32 are replaced by https://www.iasplus.com/en/standards/ifrs/ifrs7 Financial Instruments: Disclosures effective 1 January 2007. Title of Ind AS 32 changed to Financial Instruments: Presentation
22 June 2006 Exposure Draft of proposed amendments relating to Puttable Instruments and Obligations Arising on Liquidation
14 February 2008 Ind AS 32 amended for Puttable Instruments and Obligations Arising on Liquidation
1 January 2009 Effective date of amendments for puttable instruments and obligations arising on liquidation
6 August 2009 Exposure Draft Classification of Rights Issues proposing to amend Ind AS 32
8 October 2009 Amendment to Ind AS 32 about Classification of Rights Issues
1 February 2010 Effective date of the October 2009 amendment
16 December 2011 Offsetting Financial Assets and Financial Liabilities (Amendments to Ind AS 32) issued
17 May 2012 Amendments resulting from Annual Improvements 2009-2011 Cycle (tax effect of equity distributions). Click for More Information
1 January 2013 Effective date of May 2012 amendments (Annual Improvements 2009-2011 Cycle)
1 January 2014 Effective date of December 2011 amendments

Educational Material on Ind AS 32 Financial Instruments and  Presentation

Ind AS 32 Financial Instruments and  Presentation : Sounds very simple, but trust me guys Financial Instruments is the toughest topic to understand and implement. We have made an attempt to make it as simple as possible, so anyone of us can easily understand. The contents of standard have been incorporated wherever applicable so as to enable students for preparing the exams.

Key definitions of Ind AS 32

Financial instrument: a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

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Financial asset: any asset that is:

  • cash
  • an equity instrument of another entity
  • 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.

Objective of Ind AS 32

The stated objective of Ind AS 32 is to establish principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and liabilities. [Ind AS 32.1]

Ind AS 32 addresses this in a number of ways:

  • clarifying the classification of a financial instrument issued by an entity as a liability or as equity
  • prescribing the accounting for treasury shares (an entity’s own repurchased shares)
  • prescribing strict conditions under which assets and liabilities may be offset in the balance sheet

Scope of Ind AS 32

Ind AS 32 applies in presenting and disclosing information about all types of financial instruments with the following exceptions: [Ind AS 32.4]

  • interests in subsidiaries, associates and joint ventures that are accounted for under Ind AS 27 Consolidated and Separate Financial Statements, Ind AS 28 Investments in Associates or Ind AS 31 Interests in Joint Ventures (or, for annual periods beginning on or after 1 January 2013, IFRS 10 Consolidated Financial Statements, Ind AS 27 Separate Financial Statements and Ind AS 28 Investments in Associates and Joint Ventures). However, Ind AS 32 applies to all derivatives on interests in subsidiaries, associates, or joint ventures.
  • employers’ rights and obligations under employee benefit plans (see Ind AS 19 Employee Benefits)
  • insurance contracts(see IFRS 4 Insurance Contracts). However, Ind AS 32 applies to derivatives that are embedded in insurance contracts if they are required to be accounted separately by Ind AS 39

Relevant link to download the Educational Material: Ind AS 32 Financial Instruments: Presentation

Educational Material on Ind AS 32 Financial Instruments: Presentation 

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