PAS 32 Financial Instruments:Presentation contractual obligation to deliver cash when the depositor

withdraws.
PAS 32 provides guidance in presenting financial instruments
as liabilities or equity, in offsetting financial assets and Cash is the most basic financial instruments because of it
financial liabilities, and in classifying financial instruments, medium of exchange and the basis of measurement of all
from perspective of the issuer, into financial assets, financial financial statement elements.
liabilities and equity instruments.
The term financial instrument encompasses both financial
PAS 32 complements PFRS 9 FINANCIAL asset and financial liability but not the entity's "own" equity
INSTRUMENTS, which prescribes the recognition and instrument.
measurement of financial assets and financial libilities, and
PFRS FINANCIAL INSTRUMENTS: DISCLOSURES, FINANCIAL ASSET / CRIS
which prescribes the disclosures for financial instruments. 1. Cash and Cash equivalents
2. Receivable
PAS 32 applies to all types of financial instruments and to 3. Investment in equity or debt instruments of other
commodity contracts that are not financial instrument but can entities.
be settled net, 4. Sinking Fund and other long term fund.

Except the following for which other standards apply: NOT FINANCIAL ASSET / PIPE
1. investment in subsidiaries, associates and joint 1. Physical assets (inventories, biological asset, ppe and
ventures investment property)
2. employer's right and obligation under employee plans 2. Intangible asset
and share-based payments 3. Prepaid Expenses and advances to suppliers
3. insurance contracts. 4. Entity's own equity instrument (treasury shares)

Financial Intruments FINANCIAL LIABILITIES / PLHRS

-any contracts that gives rise to a financial asset of one entity 1. Payables
and financial liability or equity instrument of another entity. 2. Lease Liabilities
3. Held for trading liabilities and derivatives liabilities
Financial asset- any asset that is: 4. Redeemable preference shares issued
1. Cash 5. Security deposits
2. Equity instrument of another equity
3. Contractual right to receive cash or another financial NOT FINANCIAL LIABILITIES / UTC
asset from another entity 1. Unearned revenues and warranty obligation
4. Contractual right to exchange financial instruments 2. Taxes, SSS, Philhealth and PAG-IBIG payables
with another entity. 3. Constructive obligations.
5. Contract that will or may be settled in the entity's
own equity instruments. PRESENTATION
The issuer classifies a financial instrument, or its component
Financial Liability- is any liability that is: parts, as a financial asset, a financial liability or an equity
1. contractual obligation to deliver cash or another instrument in accordance with the substance of the contract
financial asset to another entity. and the definitions of a financial asset, a financial liability and
2. contractual obligation to exchange financial assets or an equity instrument.
financial liabilities with another entity under
conditions DIFFERENCE BETWEEN FINANCIAL LIABILITY
3. contract that will or may be settled in the entity's own AND EQUITY INSTRUMENT
equity instruments and is not classifies as the entity's
FINANCIAL EQUITY
own equity instruments.
LIABILITY INSTRUMENTS
Equity instrument - any contract that evidences a residual
The entity has a The entity has no
interest in the assets of an entity after deductung all of its
contractual obligation obligation to pay
liabilities.
to pay cash or another cash or another
-binili mo na bond, treasury bonds, treasury bills, corporate
financial asset. financial asset.
bonds, common share,and preference share.

ASSET - LIABILITIES = EQUITY A CONTRACT IS NOT AN EQUITY INSTRUMENT

MERELY BECAUSE IT IS TO BE SETTLED IN THE
Bank deposit is a financial instrument. It is a contract that ENTITY'S OWN EQUITY INSTRUMENT.
give rise to both a financial asset on the part of the depositor -do not believe on everything you see.
and a financial liability on the part of the bank. The depositor (SUBSTANCE OVER FORM)
has contractual right to withdraw his cash, while the bank has
a contractual right to withdraw his cash, while the bank has
GUIDANCE APPLIES WHEN A CONTRACT Treasury Shares
REQUIRES SETTLEMENT IN THE ENTITY'S OWN
EQUITY INSTRUMENTs -presented in equity section as a deduction in SPF or notes.

-an entity’s own shares that were previously issued but were
FINANCIAL LIABILITY
subsequently reacquired but not retired.
The contract requires The contract requires
delivery of a variable delivery of a fixed number -no gain or loss arises
number of the entity's own of the entity’s own equity
equity instruments and a instrument in exchange of a Interest, dividends, losses and gains
fixed number of the entity's fixed amount of cash or
own equity instruments in financial asset.
exchange for a variable Interest, dividends, losses and gains that relate to:
amount of cash or financial -essential feature is the Financial Liability Equity Instrument
asset. absence of a contractual -recognized as income or -recognized directly in
-legal form is irrelevant obligation to pay cash or expenses in profit/loss equity
another financial asset

- there’s an interest if you issue debt

Financial asset/ Financial Equity instrument
Liability - there’s a dividend if you equity
Variable amount for a Fixed number for a fixed -gains and losses if u retire debt instrument / when u sell to
fixed amount. amount.
others the preference/common.
Fixed number for a variable
amount. DO PREFERENCE/COMMON CAN BE ISSUED OR
UNISSUED?
A CONTRACT TO RECEIVE RATHER THAN TO -YES, after buying it back (then retire.)
DELIVER IS A FINANCIAL ASSET.
Transaction Costs
Redeemable Preference Callable preference share
share Transaction cost on issuing equity instrument to the extent that
-holder/investor/buyer -issuer/investee/seller they are avoidable costs are accounted for as deduction from
-holder has the right to call -the issuer has the right to equity.
at a set date. call at a set date
-financial liability -equity instrument Transaction cost on issuing financial liabilities are included in
the carrying amount of the financial liability and subsequently
amortized to profit or loss.
IFRIC Members’ Shares in Cooperative Entities and Similar
Instruments addresses the classification of member’s share in The cost an abandoned equity transaction are recognized as an
cooperatives. Uses the same principle as those of pas 32. EXPENSE.

Members shares in cooperative entities and similar OFSSETING A FINANCIAL ASSET AND LIABILITY
instruments are equity if:
Offset and only the net amount is presented in the SPF when
The entity has an unconditional right to refuse entity has both:
redemption of the member’s share
1. a legal right of setoff
Redemption is unconditionally prohibited by law or
relevant regulation. 2. intention to settle the amount on a net basis or
simultaneously.
Cooperative is when you put up an organization to power up
members. PAS 32 requires presenting financial asset and liabilities on a
net basis when doing so reflects an entity’s expected future
Compound Financial Instruments
cash flows from settling two or more separate financial
- A financial instrument that, from the issuer’s persperctive, instruments.
contains both a liability and an equity component and
classified/accounted separately.-ex. Tumanggap ka ng pera
kasi nag-issue ka ng debt and equity component.
PFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES

PFRS 7 prescribes the disclosure requirements for financial STATEMENT OF COMPREHENSIVE INCOME
instruments.
1. Net gains and losses
Two categories of disclosure:
2. Total interest revenue and expense
1. the significance of financial instruments for the entity’s
financial position and performance. 3. Fee income and expense

2. the nature and extent of risks arising from financial OTHER DISCLOSURES
instruments to which the entity is exposed during the period 1. Fair Value
and at the end of the reporting period, and how the entity
manages those risks. Nature and Extent of risks arising from financial
instrument
 PFRS 7 complements the presentation principle in
PAS 32 and recognition and measurement principles 1. Credit Risk
in PFRS 9.
2. Liquidity Risk
WHERE DOES PFRS 7 APPLY?
3. Market Risk
-Applies to financial instruments that are within the scope of
o Currency Risk
PFRS 9.

WHERE DOES PFRS 7 NOT APPLY? o Interest Rate Risk

-financial instruments that are dealt with under other

standards, such as:
o Other Price Risk
1. interest in subsidiaries (PFRS 10 CONSOLIDATED FS)

2. associates and joint ventures (PAS 28)

Qualitative Disclosures
3. employee benefit plans (PAS 19)
1. Risk Exposures and how they arise
4. share-based payment transactions (PFRS 2)
2. Entity’s risk management objectives, policies and processes
5. those that are required to be classified as equity instruments.
3.Any changes in a or b from the previous
Significance of Financial Instruments

 Statement of Financial Position

Quantitative Disclosures
 Statement of Comprehensive Income
 Other Disclosure 1. Summary of quantitative data about the entity’s risk
exposure at the end of the reporting period
STATEMENT OF FINANCIAL POSITION
2. Concentrations of Risk
1. Carrying amounts of financial assets and liabilities
3. Other relevant disclosures not provided in a and b.
2. Financial assets and liabilities measured at FVPL

3. Financial assets measured at FVOCI

4. Reclassification

5. Offsetting financial assets and liabilities

6. Collateral

7. Allowance account for credit losses

8. Default and breaches