IND AS 109 Financial Instrument.

The important points of Ind AS 109, Financial Instruments, are as follows:

Scope:* Ind AS 109 applies to all types of financial instruments, except for:

* Financial instruments that are within the scope of other Ind ASs, such as Ind AS 39 Financial Instruments: Recognition and Measurement and Ind AS 32 Financial Instruments: Presentation.

* Financial instruments that are held by a central bank or other monetary authority.

* Financial instruments that are issued by an entity and held by its parent or another entity that is controlled by the same parent.

As per Ind AS 109 Financial Instruments Financial Assets is any assets that is:

a)??????a contractual Right:

i.?to receive cash or other financial asset of another entity (e.g. a Receivable)

??ii.?to exchange financial assets or financial liabilities with another entity under?conditions that are potentially favourable to the entity. or

b)?????a contract that will or may be settled in the other entity equity instruments.

Financial liability is any liability is

c)??????a contractual obligation:

i.?to deliver cash or another financial asset to another entity (e.g. a payable)

ii.?to exchange financial assets or financial liabilities with another entity under?conditions that are potentially unfavorable to the entity (e.g. a financial option written by the entity); or

b)?????a contract that will or may be settled in the entity’s own equity instruments and is:

i.??a non-derivative contract for which the entity is or may be obliged to deliver a variable number of its own equity instruments (e.g. an instrument that is redeemable in own shares to the value of the carrying amount of the instrument); or

ii.??a derivative contract over own equity that will or may be settled other than by the exchange of a fixed amount of cash (or another financial asset) for a fixed number of the entity’s own equity instruments (e.g. a net-share settled written call over own shares).

Equity instruments which has residual interest in the Net asset of the entity.

As per Ind AS 32 Financial Instruments: Presentation, Financial Liability is any liability that is Classification:* Ind AS 109 classifies financial assets into four categories:

* Held-to-maturity investments.

* Financial assets at fair value through profit or loss (FVTPL).

* Financial assets at fair value through other comprehensive income (FVOCI).

* Loans and receivables.

* Available-for-sale financial assets.

Measurement:* The measurement of financial assets and financial liabilities depends on their classification.

* Held-to-maturity investments are measured at amortized cost. If intention to hold till maturity. We need to calculate the Fair value at the time of initial recognition, for this we will discount the future cash flow with EIR to calculate the fair value of the FA.

* FVTPL financial assets are measured at fair value which are held for Trading.

* FVOCI financial assets are measured at fair value, with changes in fair value recognized in other comprehensive income which intention is to hold the asset for sometime & sell it before maturity.

* Loans and receivables are measured at amortized cost, unless there is objective evidence of impairment.

* Available-for-sale financial assets are measured at fair value, with changes in fair value recognized in the statement of profit or loss.

*Compound Financial instruments: Instrument which has the feature of FL and equity

Derecognition:* A financial asset or financial liability is derecognized when the entity no longer has a present right to receive cash flows or a present obligation to deliver cash flows.

Impairment:* Financial assets are subject to impairment when there is a loss in their carrying amount that is not recoverable.

Disclosure:* Ind AS 109 requires extensive disclosures about financial instruments, including their nature, risk, and measurement.

Here are some additional important points of Ind AS 109:

* The standard requires entities to use the fair value measurement for financial instruments, except for those that are held-to-maturity investments and loans and receivables.

* The standard also requires entities to disclose information about their financial instruments, such as their nature, risk, and measurement.

* Ind AS 109 is a complex standard, and entities should seek professional advice when applying it.

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