IFRS – IAS 32: Financial Instruments: Presentation

The International Accounting Standards Committee (IASC) released International Accounting Standard 32 (IAS 32) to address the topic of Financial Instrument Presentation.

To state it specifically, its objective is to set standards for presenting financial instruments as liabilities or equity and for offsetting financial assets and liabilities.  IAS 32 is to be looked at as a partner of IAS 39.  When considering whether to classify a financial instrument as a liability or equity, one should consider the substance of the contract.  The standard differentiates between these two based on specifics therein.

IAS are principles based standards, rather than strict rules based standards that govern international accounting. IAS standards differ from IFRS standards in that they were introduced prior to 2001, whereas IFRS were produced after this date by the IASB, or the International Accounting Standards Board. When determining the hierarchy of these, the IAS is considered to be the building blocks in which the newer and more relevant IFRS are founded and therefore IFRS is more authoritative when these conflict.

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