FRK300

lOMoARcPSD|8949379




IAS 32 Notes


Financial accounting 300 (University of Pretoria)




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1. Introduction
 Deals with classification of financial instruments
 From perspective of issuer
 Focus on substance rather than legal form
 2 parties to any financial instrument:
o financial asset of one entity
o financial liability/equity instrument of another entity
 Most important elements of a financial asset/liability:
o Must be a contract
o Must be cash flows in accordance with contract



2. Definitions
 Financial instrument: any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity

 Financial asset: any asset that is:
o cash
o equity instrument of another entity
o a contractual right:
 to receive cash or another financial asset from another entity; or
 to exchange financial assets or financial liabilities with another entity under
conditions that are potentially favourable to the entity

 Financial liability: any liability that is:
o a contractual obligation:
 to deliver cash or another financial asset to another entity; or
 to exchange financial assets or financial liabilities with another entity under
conditions that are potentially unfavourable to the entity




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