IAS 32 Financial Instruments: Presentation

Synopsis

IAS 32 classifies financial instruments into:

• Financial assets
• Financial liabilities
• Equity

...in accordance with the substance of the arrangement and the definitions of these elements. In certain cases, such as convertible debt, the instrument is split into a liability and equity element. Financial assets and liabilities may only be offset where there is a legally enforceable right to offset and the entity intends to settle on a net basis. Any treasury shares are deducted from equity.

Interest, dividends, losses and gains related to a financial liability are recognised in profit or loss; dividends in relation to equity instruments are recognised directly in equity.

• Read the unaccompanied version of IAS 32

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Which version of the standard?

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Recent amendments

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The following interpretations refer to IAS 32

• IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments
  Provides guidance on classifying members’ shares in co-operative entities as financial liabilities or equity.
• IFRIC 12 Service Concession Arrangements 
• Accounting guidance for arrangements where a contract is granted for the supply of public services such as roads.
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
  Addresses the accounting by an entity which issues equity instruments in order to settle, in full or part, a financial liability.

Current proposals

1. The IASB is engaged in a research project to investigate potential improvements to the classification of liabilities and equity and the presentation and disclosure requirements for financial instruments with the characteristics of equity regardless of whether they are classified as equity or liabilities. A discussion paper was issued in June 2018 and the next stage is expected to be an exposure draft.
   • Read DP/2018/1 Financial Instruments with Characteristics of Equity 

This page was last updated 30 August 2022.