FINANCIAL INSTRUMENT: RECOGNITION & MEASUREMENT”
PART 02
Classification of FL
- Financial Liabilities (FL) at fair value through profit & loss
o FL held for trading
§ Derivative liabilities (which are not accounted for hedging instrument)
§ Obligation to deliver securities or other FA borrowed by a short seller
§ FL that are incurred with the intention to repurchase them in near future
§ Forms part of portfolio of identified financial instruments and on which there is a proof of recent actual short term profit.
o Other FL
§ All liabilities, other than trading liabilities and derivatives that are hedging instrument, are falls under this category, like
§ Trade creditors, borrowings, Etc.
Accounting for Financial Asset
The main points to be discussed here is
- Time of recognition at balance sheet
o When it is a party to a contractual provision,
o When accounting is done by Trade Date
§ Both FA & FL recognized on purchase date
§ In case of interest bearing Instrument (bond, debt, etc.), Interest does not accrues on and from trade date
o When accounting is done by Settlement Date
