IAS 32 Objective Scope Definitions


1 [Deleted]

2 The objective of this Standard is to establish principles for presenting financial instruments as liabilities or equity and for offsetting financial assets and financial liabilities. It applies to the classification of financial instruments, from the perspective of the issuer, into financial assets, financial liabilities and equity instruments; the classification of related interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities should be offset.

3 The principles in this Standard complement the principles for recognising and measuring financial assets and financial liabilities in IFRS 9 Financial Instruments, and for disclosing information about them in IFRS 7 Financial Instruments: Disclosures.


4 This Standard shall be applied … Read more

IAS 32 Presentation

Liabilities and equity (see also paragraphs AG13–AG14J and AG25–AG29A)

AG13 |   AG14J  |   AG25  |   AG29A

15 The issuer of a financial instrument shall classify the instrument, or its component parts, on initial recognition as a financial liability, a financial asset or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a financial asset and an equity instrument.

16 When an issuer applies the definitions in paragraph 11 to determine whether a financial instrument is an equity instrument rather than a financial liability, the instrument is an equity instrument if, and only if, both conditions (a) and (b) below are met.

  1. The instrument includes no contractual obligation
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IAS 32 AG Definitions

Appendix Application Guidance IAS 32 Financial Instruments: Presentation

This appendix is an integral part of the Standard.

AG1 this Application Guidance explains the application of particular aspects of the Standard.

AG2 The Standard does not deal with the recognition or measurement of financial instruments. Requirements about the recognition and measurement of financial assets and financial liabilities are set out in IFRS 9.

Definitions (paragraphs 11–14)

11-Definitions  |    14-Definitions

Financial assets and financial liabilities

AG3 Currency (cash) is a financial asset because it represents the medium of exchange and is therefore the basis on which all transactions are measured and recognised in financial statements. A deposit of cash with a bank or similar financial institution … Read more

IAS 32 AG Presentation

Appendix Application Guidance IAS 32 Financial instruments: Presentation


Liabilities and equity (paragraphs 15–27)

No contractual obligation to deliver cash or another financial asset (paragraphs 17–20)

AG25 Preference shares may be issued with various rights. In determining whether a preference share is a financial liability or an equity instrument, an issuer assesses the particular rights attaching to the share to determine whether it exhibits the fundamental characteristic of a financial liability. For example, a preference share that provides for redemption on a specific date or at the option of the holder contains a financial liability because the issuer has an obligation to transfer financial assets to the holder of the share.

The potential inability of an issuer to … Read more

IE1-Introduction-Illustrative examples

Illustrative examples

These examples accompany, but are not part of, IFRS 32 Financial Instruments: Presentation

Accounting for contracts on equity instruments of an entity


The following examples^1 illustrate the application of paragraphs 1527 and IFRS 39 Financial Instruments: Recognition and Measurement to the accounting for contracts on an entity’s own equity instruments (other than the financial instruments specified in paragraphs 16A and 16B or paragraphs 16C and 16D).

Note ^1 In these examples, monetary amounts are denominated in ‘currency units (CU)’.Read more

IE2-Example 1: Forward to buy shares

This example illustrates the journal entries for forward purchase contracts on an entity’s own shares that will be settled

  1. net in cash,
  2. net in shares, or
  3. by delivering cash in exchange for shares.

It also discusses the effect of settlement options (see (d) below).

To simplify the illustration, it is assumed that no dividends are paid on the underlying shares (ie the ‘carry return’ is zero) so that the present value of the forward price equals the spot price when the fair value of the forward contract is zero. The fair value of the forward has been computed as the difference between the market share price and the present value of the fixed forward price.


Contract date    … Read more