financial instruments

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“ Financial instrument is an important topic in accounting; there are several standard relating to it. The best standard identifies & explains the financial instrument is IAS32, IAS 39, and IFR7&IFRS9. 4.1 IAS 32 Financial Instruments: Disclosure& Presentation In 2005 International Accounting standard board (IASB) issued IAS32 that was the first standard relating to financial instrument and deals with disclosure and presentation of financial instruments. The objective of this standard is to provide information to improve the understanding of users about the importance of financial instruments as a result they can understand the entity performance and financial position better and the users can assess amount, time of future cash flows related to financial instruments. IAS32 classify and identify financial instrument as financial assets, financial liability, derivatives and equity instrument and it give a lot of attention to explain the differences between financial liability and equity instrument so to avoid any doubt the instruments will classify as equity instrument if both tow things occurred: (a) if the instrument not include in contractual obligation (b) If the instrument Settled in the issuer own equity instrument. It requires classification for item in Income statement and relating to Balance sheet to match with their Balance sheet classification like interest expense, interest income, dividends and gains and losses. IAS32 put asset of requirements for offsetting financial assets and financial liability so the entity can offset financial asset and financial liability when the entity has a legal enforceable right to offset and intend either to settle on a net basis or to relies the asset. IAS32 contains a group of requireme...

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... issued IFRS7. The objective of this standard is to provide information and disclosure in the financial statements so the users of this financial statement can understand the importance of financial instrument, they can assess the risk relating to financial instruments, they can identify the nature of the risk and to what extent risk arising from financial instruments and they can understand the entity performance and financial position. This standard not require only quantitative information disclosure like market risk and liquidity risk but it also requires to disclosure of qualitative information about exposure to risk that are a rising from financial instruments .For example, the entity must disclosure the management objectives, polices and planes for managing risks so all of this information and disclosure will help users to make decision.
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