Financial instruments define as "any contract that gives rise to a financial asset of one entity and a financial liabilities or equity instruments of another entity".
International Accounting Standard Board (IASB) played an important role in development standards for financial instruments for many years.
In 2003 the IASB issued two standard relating to the financial instruments, First one is IAS32 this standard explains financial assets and financial liabilities, it explains the differences between financial liabilities and equity instruments, and it put set of disclosure requirements simply it explain presentation and disclosure of financial instrument.
Second one is IAS39 this standard requires all financial instruments to be recorded at fair value and from here a lot of people blamed fair value method for financial crisis also it explain measurement and recognition issues.
AISB believes that users of financial instruments need information about entity performance, financial position for entity and risks arising from financial instruments so IASB conclude that it must do improvement for disclosure in IAS32 and it did. In 2005 It issued IFRS7 it applies risks arising from financial instrument and enhance disclosure requirement also it requires quantitative and qualitative information for users.
As the economy globalized and financial becomes very complex the IASB issued IFRS9 in 2009,...
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4. Equity Instrument: any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
5. Derivatives: A financial instrument that derives its value from another underlying item, such as a share price or interest rate and its value must change in response to a change in underlying item and it must require no initial investment and settled at a future date.
6. Measurement: The process of determining the monetary amount at which an asset, liability, income or expense is reported in the financial instrument.
7. Recognition: The process of incorporating in the financial statements an item that meets the definition of asset, liability. Income and expense.
8. Derecognition: The process of removed financial assets or financial liability from financial statement when and only when, they are extinguished.
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