Ind AS 32, Financial Instruments: Presentation – In Detailed

Ind AS 32, Financial Instruments Presentation: The objective of Ind AS 32 is to establish principles for presenting monetary instruments as liabilities or equity and for offsetting monetary assets and financial liabilities. It uses to the category of monetary instruments, from the viewpoint of the issuer, into financial assets, financial liabilities and equity instruments; the classification of associated interest, dividends, losses and gains; and the situations in which monetary properties and monetary liabilities should be balanced out.

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The concepts in this Standard complement the concepts for recognising and measuring monetary assets and monetary liabilities in Ind AS 109, Financial Instruments, and for revealing information about them in Ind AS 107, Financial Instruments: Disclosures

This Basic specifies Financial Instrument, Financial Possession, Financial Liability, Equity Instrument, Puttable Financial Instruments.

Content in this Short Article.


This standard needs a company to classify the instrument, or its component parts, on preliminary recognition as a monetary liability, a monetary property or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, a monetary property and an equity instrument. An instrument is an equity instrument if it proofs a residual interest in the net properties of the entity and both the list below conditions are met:

  • The instrument includes no contractual responsibility to provide cash or another monetary possession to another entity; or to exchange monetary possessions or financial liabilities under potential damaging condition to the
  • In case of settlement by the provider’s own equity instruments, it should be fixed to repaired contracts (no. of equity instruments and the price per unit of equity instruments is fixed).

Puttable Financial Instruments

As an exception, puttable instruments are categorized as an equity instrument even if they satisfy the meaning of monetary liability. A puttable instrument is a financial instrument that gives the holder of the instrument the right to put the instrument back to the company for money or another financial asset or is automatically returned to the provider on the event of an unpredictable future event or the death or retirement of the instrument holder.

Settlement Choices

In case an acquired monetary instruments provides an alternative to one party to pick between different modes of settlement (settlement web in money or by exchanging shares for cash), such derivative instrument should be a financial possession or a financial liability unless all of the settlement options would result in it being an equity instrument.

Substance Financial Instruments

Such components shall be categorized separately as financial liabilities or equity instruments. Example, bonds with an option to convert into equity.

If an entity reacquires its own equity instruments, those instruments (‘ treasury shares’) shall be deducted from equity. No gain or loss will be acknowledged in revenue or loss on the purchase, sale, problem or cancellation of an entity’s own equity instruments.

Interest, dividends, losses and gains

An entity needs to recognise all interest, dividends, losses and gains associated with the monetary instrument as income or expenditure in earnings or loss. Circulations to holders or transaction cost of an equity deal must be recognised by the entity directly in equity.

Offsetting a monetary property and a monetary liability

An entity should offset a financial property and a financial liability and the net quantity must be presented in the balance sheet only when it has:

  • current lawfully enforceable right to trigger the identified amounts; and
  • means either to pick a net basis, or to realise the property and settle the liability

An entity that undertakes a variety of financial instrument deals with a single counterparty might participate in a ‘master netting plan’ with that counterparty. Such a contract provides for a single net s ettlement of all monetary instruments covered by the contract in case of default on, or termination of, any one agreement.

Consolidated financial statements

An entity in its combined monetary declarations, when classifying a financial instrument (or a component of it) should consider all conditions agreed in between members of the group and the holders of the instrument in figuring out whether the group as a whole has an obligation to deliver money or another financial asset in respect of the instrument or to settle it in a manner that results in liability classification.

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