Introduction :
Financial Instrument is a document which has a monetary value. Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. A financial instrument includes wide spectrum of assets and liabilities of entities and contrary to popular impression is not limited to investments or merely capital market instruments and drafts, cheques, promissory notes and bill of exchange. It includes within its ambit – receivables, payables, debentures, bonds, etc.
Accounting, Standard (AS) 30, Financial Instruments: Recognition and Measurement, issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of accounting periods commencing on or after 1-4-2009 and will be recommendatory in nature for an initial period of two years. This Accounting Standard will become mandatory in respect of accounting periods commencing on or after 1-4-2011 for all commercial, industrial and business entities except to a Small and Medium-sized Entity, as defined below:
1. Whose equity or debit securities are not listed or are not in the process of listing on any stock exchange, whether inIndiaor outsideIndia;
2. Which is not a bank (including co-operative bank), financial institution or any entity carrying on insurance business;
3. Whose turnover (excluding other income) does not exceed rupees fifty crore in the immediately preceding accounting year;
4. Which does not have borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding accounting year; and
5. Which is not a holding or subsidiary entity of an entity which is not a small and medium – sized entity.
Objective:
1. Objective of this accounting standard is to prescribe the principles for recognising and measuring the financial assets and financial liabilities. The principles for presentations of financial assets and financial liabilities in the financial statements are prescribed in AS- 31 “Financial Instruments: Presentation”. Another accounting standard namely “Financial Instruments: Disclosure” (AS-32) prescribes the requirements for disclosing the information about the financial instruments through notes and policies to the financial statements.
2. The objective of this Standard is to establish principles for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items.
3. Requirements for presenting information about financial instruments are in Accounting Standard (AS) 31, Financial Instruments: Presentation.
4. Requirements for disclosing information about financial instruments are in Accounting Standard (AS) 32, Financial Instruments: Disclosures
5. Applicability of Accounting Standard: Application w.e.f. accounting periods commencing on or after 1-4-2009 and will be recommendatory in nature for an initial period of two years. It will be mandatory on or after 1-4-2011 for all commercial, industrial and business entities except to a Small and Medium-sized Entity.
6. The objective of this accounting standard is to establish principles for recognising and measuring, financial assets, financial liabilities and some contracts to buy or sell non-financial items.
7. The requirements for presenting information about financial instruments are in Accounting Standard (AS) – 31, Financial Instruments: Presentation. The requirements for disclosing information about financial instruments are in Accounting Standard (AS) – 32, Financial Instruments: Disclosures.
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