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IAS 39 Financial Instruments: Recognition and Measurement

IAS 39 Financial Instruments: Recognition and Measurement sets out the principles for recognising and measuring financial liabilities and some contracts to buy or sell non-financial items.

Revised December 2003 and March 2004. Effective 1 January 2005. IAS 39 requirements for classification and measurement, impairment, hedge accounting and derecognition are withdrawn for periods starting on or after 1 January 2018 when IAS 39 is largely superseded by IFRS 9 Financial Instruments.

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IAS 39 requires financial assets (as defined in IAS 32) to be classified as one of:

  • Fair value through profit or loss
  • Available-for sale
  • Held to maturity, or
  • Loans and receivables.

Financial liabilities (as defined in IAS 32) must be classified as:

  • Fair value through profit or loss, or
  • Financial liabilities

Financial assets and liabilities are initially recognised at fair value plus, if not categorised as fair value through profit or loss, transaction costs.

Subsequent measurement depends which of the above categories the financial instrument is classified as. Normally measurement is at fair value or amortised cost.

Financial assets are derecognised when the contractual rights to cash flows from the asset expire, or the asset and associated risks and rewards are transferred.

Financial liabilities are derecognised when the obligation specified in the contract expires, is cancelled or discharged.

IAS 39 also provides guidance on hedge accounting, classifying hedging relationships as one of three types:

  • Fair value hedge
  • Cash flow hedge
  • Hedge of a net investment in a foreign operation.

The International Accounting Standards Board (IASB) provides free access to the consolidated unaccompanied international accounting standards for the current year through its website. Free registration is required.

This unaccompanied version does not include additional content that accompanies the full standard, such as illustrative examples, implementation guidance and bases for conclusions.

Which version of the standard?

Financial Reporting Faculty members who joined the faculty prior to 1 November 2022 have premium access to the consolidated edition of IFRS and amendments through the IASB's IFRS Standards Navigator service. Please log into IFRS Standards Navigator to access electronic versions of the standards through these links.

Please be aware that as part of the changes to ICAEW faculty membership, this service will be withdrawn after 31 December 2022.

Recent amendments

Full access to details of all the amendments is only available to Financial Reporting Faculty members. Find out how to join the faculty.

Current proposals

  1. The final issue of IFRS 9 in 2014 includes general hedge accounting guidance. The IASB has, as a separate project, issued a discussion paper on macro hedge accounting. When this project is complete, the new guidance will replace that in IAS 39. The Board has completed Core Model Outreach to gather stakeholders’ views and is now considering the challenges identified. 

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This page was last updated 30 August 2022.