IAS 32

Question 1

What does it deal with

Answer 1

Definitions and presentations of financial instruments

The distinction between liabilities and equity

Question 2

What is a financial instrument

Answer 2

Any contract which gives rise to a financial asset of one entity and a financial liability or equity instrument to another

Question 3

What is a financial asset

Answer 3

1 - cash
2- a contractual right to recieve cash or another financial asset
3- a contractual right to exchange financial instruments with another entity under conditions under conditions that are potentially favourable

4- an equity interest of another entity

Question 4

What is an equity instrument

Answer 4

Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities

Question 5

Examples

Answer 5

Financial assets

• cash
• trade receivables
• loans
• favourable exchange

Financial liabilities
- bank overdraft
- trade payables
-loans
- unfavourable exchange

Equity
- ordinary shares
- certain preferences shares