Practical Accounts And Taxation
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In the process of upgrading existing Accounting Standards (AS) on request of the Ministry of Corporate Affairs (MCA), the Institute of Chartered Accountants of India (ICAI) has issued exposure draft of AS 109, Financial Instruments. This Standard has been drafted on the basis of IFRS 9, Financial Instruments applicable for Small and Medium Enterprises (SMEs). It consists provisions from the existing Guidance Note on Accounting for Derivative Contracts issued by ICAI. The exposure draft is divided into three parts; Section A, Basic Financial Instruments; Section B, Other Financial Instruments and Section C, Liabilities and Equity.
Section A and Section B together deal with the recognition, measurement, derecognition, presentation and disclosure of financial instruments, while Section C deal with classification of financial instruments as equity or liability. Section A applies to basic financial instruments which are commonly used and have simple features. Section B applies to other, more complex financial instruments and similar transactions. Hence, if an entity applies Section B, Section A will not be applicable to it.
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