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 IAS 39 requirements for classification and measurement, impairment, hedge accounting and derecognition are withdrawn for periods starting on or after 1 January 2018 when IAS 39 is largely superseded by IFRS 9 Financial Instruments.

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Synopsis

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.

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

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Recent amendments

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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 4 February 2022.