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Jul 2011

LKAS 32 and LKAS 39: financial instruments

The latest paper from the CIMA Sri Lanka accounting standard study group examines LKAS 32: financial instruments – presentation and LKAS 39: financial instruments – recognition and measurement. It aims to establish principles for the presentation, categorisation, recognition and measurement of financial instruments in financial reports.

LKAS 32 and LKAS 39 give detailed descriptions of the accounting treatment and presentation of financial instruments, with an implementation date of 1 January 2012. The application of these two standards consistently in organisations will be a major challenge for both the management of the organisation (in terms of reporting) as well as the regulators (in terms of monitoring), and a clear understanding of the standard is imperative to enable a relatively seamless transition.

"An instrument is classified as liability or equity based on the substance of the contractual arrangement rather than its legal form."

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LKAS 32 and LKAS 39: financial instruments