What is IND AS 107 financial instruments?
IND AS 107 applies to entities that prepare financial statements in accordance with the Indian Accounting Standards (IND AS). It is particularly relevant for entities dealing with financial instruments like- debt, equity, derivatives, and other investment instruments.
IND AS 1 establishes the minimum requirements for the presentation of financial statements, including the balance sheet, income statement, statement of changes in equity, and statement of cash flows. It also specifies the minimum requirements for disclosures in the notes to the financial statements.
Compound financial instruments
To illustrate, a convertible bond contains two components. One is a financial liability, namely the issuer's contractual obligation to pay cash, and the other is an equity instrument, namely the holder's option to convert into common shares.
Common examples of financial instruments include stocks, exchange-traded funds (ETFs), mutual funds, real estate investment trusts (REITs), bonds, derivatives contracts (such as options, futures, and swaps), checks, certificates of deposit (CDs), bank deposits, and loans.
Classification of financial assets: Ind AS 109 has two measurement categories: amortised cost and fair value. Movements in fair value are presented in either profit or loss or other comprehensive income, subject to certain criteria being met, as described below.
One example is an entity's obligation under a forward contract to purchase its own equity instruments for cash. When the financial liability is recognised initially under Ind AS 39, its fair value (the present value of the redemption amount) is reclassified from equity.
The difference between GAAP and IND AS is that GAAP is used in the United States of America and Ind AS is used specifically in India. Also read: Difference Between Cash Basis and Accrual Basis of Accounting. Accrual Basis of Accounting.
A compound financial instrument, such as a convertible bond, is split into equity and liability components. When the instrument is issued, the equity component is measured as the difference between the fair value of the compound instrument and the fair value of the liability component.
Answer and Explanation: The correct option is (b) The issuer shall classify the liability and equity components of a compound instrument separately as financial liabilities, financial assets, or equity instruments. International Accounting Standard 32 (IAS 32) deals with financial instruments.
The following are examples of items that are not financial instruments: intangible assets, inventories, right-of-use assets, prepaid expenses, deferred revenue, warranty obligations (IAS 32. AG10-AG11), and gold (IFRS 9.
What is the difference between a financial asset and a financial instrument?
Financial instruments are classified as financial assets or as other financial instruments. Financial assets are financial claims (e.g., currency, deposits, and securities) that have demonstrable value.
The two most prominent financial instruments are equities and bonds. Equities (or shares) are the ownership of a portion of a company, which can then be traded.
Ind AS 109, Financial Instruments requires on initial recognition a financial asset or financial liability is measured at fair value plus or minus directly attributable transaction costs, unless the instrument is classified as at fair value through profit or loss or is a trade receivable that does not have a ...
Ind AS 109 further clarifies that terms are considered to have been substantially modified when the net present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate – i.e. of the original debt instrument – differs by at ...
Ind AS 109 allows an entity to exclude the forward element of a forward contract and designate only the changes in the spot element in a hedging relationship.
Financial statements do not comply with Ind ASs if they contain either material errors or immaterial errors made intentionally to achieve a particular presentation of an entity's financial position, financial performance or cash flows.
GAAP (Generally Accepted Accounting Principles), IFRS (International Financial Reporting Standards), and Indian Accounting Standards (Ind AS) are three different sets of accounting standards used by companies and organizations around the world to prepare and present their financial statements.
Indian Accounting Standards Aka Ind As. were developed to harmonize standards related to international accounting and reporting. Accounting standards standardize the whole accounting procedure of the economy. All companies after adopting these accounting standards follow the same manner of recording transactions.
All companies listed on stock exchanges in India or outside India with a net worth of Rs. 250 crore or more and unlisted companies with a net worth of Rs. 500 crore or more are required to comply with Ind AS. This includes subsidiaries, joint ventures, and associates of such companies.
The difference between US GAAP and Indian GAAP is that US GAAP does not allow revaluation of property, plant and equipment while Indian GAAP allows revaluation of property, plant and equipment. Also read: MCQs on GAAP. GAAP (Generally Accepted Accounting Principles)
What is the major difference between IND as and IFRS?
The international financial reporting standards permits companies to report on the financial statements quarterly which will be three months in duration. On the other hand, the Indian Accounting Standards permits companies to report on their financial statements annually which will be 12 months in duration.
Most savings accounts compound interest at least once per year, though the rates can vary widely. High-yield savings account: This type of savings account offers higher interest rates than those typically available for traditional savings accounts.
The two asset classes of financial instruments are debt-based financial instruments and equity-based financial instruments.
A financial asset and a financial liability can only be offset (i.e. presented net) in limited circ*mstances. However, in other circ*mstances, financial assets and financial liabilities are presented separately from each other consistent with their characteristics as resources or obligations of the entity.
Answer: Annuities are not a type of equity instrument.
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