IAS 39

The International Accounting Standard 39 (IAS 39 ) is an accounting standard issued by the IASB.

Introduction

IAS 39 prescribes the recognition and measurement of

• Financial assets,
• Financial liabilities and
• Certain contracts to buy or sell non-financial items.

In particular, IAS 39 also the recognition and measurement of derivatives. An important aspect of IAS 39 in this context is the so-called hedge accounting. The standard is fundamentally different from all reporting entity ( entities ) applies to all types of financial instruments.

IAS 39 is at the same time - with the approved by the Commission prior - binding EU balance and EU reporting rule. Among the various Accounting Standards IAS 39 is the most controversial and most discussed rule.

Development and application of IAS 39

The work on a standard for the collection, measurement and disclosure of financial instruments began in 1988 IAS 39 was preceded by three drafts. :

• E 40 Financial Instruments 1991
• E 48 Financial Instruments 1994
• E 62 Financial Instruments: Recognition and Measurement, 1998.

During this phase, the rules have been separated for disclosure and adopted in a separate Standard 1995: IAS 32 Financial Instruments: Disclosure and Presentation. IAS 39 was issued in December 1998 and was only intended as " interim standard ". Immediately after its publication, the IASC / IASB created a new topic specific project. At the same time since 1997, launched in cooperation with other standard setters, efforts were continued to a strong expansion of the application of fair value in accounting for financial instruments. They culminated in 2000 in the publication of a draft standard, which, however, so far no comprehensive proved unsuccessful. According Jan. 2010 protocol of the IASB Fair Value preamble of the IAS / IFRS evaluation scheme is to be while away from mark-to -market, to mark- to-model back, ie mathematical and stochastic valuation formulas.

Scope

IAS 39 prescribes the recognition and measurement of financial assets and financial liabilities and is effective for all financial instruments. Exceptions to this application are governed by IAS 39.2. In accordance with IAS 32 IAS 39.8 defines a financial instrument as follows:

A financial instrument is any contract gives rise to a finance did asset of one entity and a financial liability or equity instrument of another entity.

Under a financial instrument to all contractual claims and obligations are to be understood, which have a direct or indirect exchange of cash for the subject. Arising from contracts or agreements rights or obligations have to be based on financial matters. Financial instruments in accordance with IAS 39, financial assets, financial liabilities and equity instruments divide.

The borrowed from IAS 32 Description of a financial asset in accordance with IAS 39.11 includes the following items and rights:

• To receive cash or another financial asset from another entity or
• To exchange financial assets or financial liabilities with another entity under potentially favorable conditions

• A non- derivative financial instrument contains an obligation of the company, or may involve, to receive a variable number of its own equity instruments
• A derivative financial instrument is to be met in some other way or can be used as by the exchange of a fixed amount or another financial asset for a fixed number of own equity instruments.

A financial liability or liability in contrast, is

• To deliver cash or another financial asset to another entity
• To exchange financial assets or financial liabilities that are potentially unfavorable terms with another company

• A non- derivative financial instrument contains an obligation of the company, or may involve, to deliver a variable number of its own equity instruments
• A derivative financial instrument is to be met in some other way or can be used as by the exchange of a fixed amount or another financial asset for a fixed number of own equity instruments.

An equity instrument (equity instrument ) IAS 32 and IAS 39, a contractual agreement, which has a residual interest in the assets of an entity after deducting all liabilities to the object.

In accordance with IAS 39.9, a derivative is deemed to exist when a financial instrument:

Valuation principles

IAS 39 is based in its current version basically on a "mixed model " of evaluation. This means that the standard contains both elements of the balance sheet at amortized cost, as well as elements of fair value (fair value). The assessment is based ( called IFRS categories ) according to categories of balance sheet items.

The amortized cost of a financial asset or a financial liability ( amortized cost of a financial asset or financial liability ) are in accordance with IAS 39.9, the amount at which they were measured at initial recognition minus principal repayments, plus or minus the cumulative using the effective interest method amortization of any difference between that initial amount and the amount at maturity and minus any losses ( either directly or by using a depreciation item ) for downs or impairments. The effective interest method ( effective interest method ) is used to calculate the amortized cost and of allocating the interest income and interest expense over the relevant period. The effective interest rate ( effective interest rate) is the interest rate that exactly discounts estimated future cash inflows or outflows ( estimated future cash payments or receipts ) during the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability.

IAS 39.9 refers to the fair value or fair value as the amount for which, between knowledgeable, willing and independent business partners ( at arm's length transaction in ) an asset exchanged or a liability could be settled. The concept of fair value can be translated with the terms of the market value or fair value. The term " fair value " is, however, bounded generally aware of a possible " Market Value" in order to take account of the fact that for a variety of financial instruments not quoted market price is available, and this can be determined only with the help of models can. IAS 39 provides for the determination of fair value before primarily publicly quoted market prices. If there is no active market, the fair value can be determined by using valuation methods:

" Valuation techniques include using recent arm's length market transactions in between knowledgeable, willing parties, if available, reference to the current fair value of another instrument did is Substantially the same, discounted cash flow analysis and option pricing models. "