IAS 39, Financial Instruments: Recognition and Measurement

IAS 39, Financial Instruments: Recognition and Measurement, was an International Accounting Standard that provided guidelines on the recognition and measurement of financial instruments. However, it has been superseded by IFRS 9, Financial Instruments, effective January 1, 2018, where IFRS 9 is applied.

Key points regarding IAS 39 and financial instruments include:

1. Classification: Financial instruments are classified into four categories: financial assets at fair value through profit or loss (FVTPL), loans and receivables, held-to-maturity investments, and available-for-sale financial assets.

2. Recognition: Financial assets and financial liabilities should be recognized when the entity becomes a party to the contractual provisions of the instrument.

3. Measurement: Financial instruments are measured at fair value or amortized cost, depending on their classification.

4. Derecognition: Financial assets and financial liabilities are derecognized when the contractual rights to the cash flows from the asset expire, or when the entity has transferred the risks and rewards of ownership of the asset.

5. Impairment: Financial assets are tested for impairment when there is objective evidence of impairment. The impairment loss is recognized in profit or loss.

6. Hedge Accounting: Hedge accounting is permitted for certain financial instruments that are designated as hedging instruments.

7. Disclosure: Entities are required to disclose information about the nature and extent of their financial instruments, including their classification, measurement, and risk management activities.

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