IAS 30

Accounting Standard (AS) 30


Financial Instruments: Recognition and Measurement

(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have

equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting

Standard should be read in the context of its objective and the Preface to the Statements of

Accounting Standards (revised 2004)1.)

Accounting Standard (AS) 30, Financial Instruments: Recognition and Measurement, issued by

the Council of the Institute of Chartered Accountants of India, comes into effect in respect of

accounting periods commencing on or after 1-4-2009 and will be recommendatory in nature for

an initial period of two years. This Accounting Standard will become mandatory2 in respect of

accounting periods commencing on or after 1-4-2011 for all commercial, industrial and business

entities except to a Small and Medium-sized Entity, as defined below:

(i) Whose equity or debt securities are not listed or are not in the process of listing on

any stock exchange, whether in India or outside India;

(ii) which is not a bank (including co-operative bank), financial institution or any

entity carrying on insurance business;

(iii) whose turnover (excluding other income) does not exceed rupees fifty crore in the

immediately preceding accounting year;

(iv) which does not have borrowings (including public deposits) in excess of rupees

ten crore at any time during the immediately preceding accounting year; and

(v) which is not a holding or subsidiary entity of an entity which is not a small and

medium-sized entity.

For the above purpose an entity would qualify as a Small and Medium-sized Entity, if the

conditions mentioned therein are satisfied as at the end of the relevant accounting period.

1 Attention is specifically drawn to paragraph 4.3 of the Preface, according to which accounting standards are

intended to apply only to items which are material.

2 This implies that, while discharging their attest function, it will be the duty of the members of the Institute to

examine whether this Accounting Standard is complied with in the presentation of financial statements covered by

their audit. In the event of any deviation from this Accounting Standard, it will be their duty to make adequate

disclosures in their audit reports so that the users of financial statements may be aware of such deviations.

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From the date of this Standard becoming mandatory for the concerned entities, the following

stand withdrawn:

(i) Accounting Standard (AS) 4, Contingencies and Events Occurring After the

Balance Sheet Date, to the extent it deals with contingencies3.

(ii) Accounting Standard (AS) 11 (revised 2003), The Effects of Changes in Foreign

Exchange Rates4, to the extent it deals with the ‘forward exchange contracts’.

(iii) Accounting Standard (AS) 13, Accounting for Investments, except to the extent it

relates to accounting for investment properties.

From the date this Accounting Standard becomes recommendatory in nature, the

following Guidance Notes issued by the Institute of Chartered Accountants of India, stand

withdrawn:

(i) Guidance Note on Guarantees & Counter Guarantees Given by the Companies.

(ii) Guidance Note on Accounting for Investments in the Financial Statements of

Mutual Funds.

(iii) Guidance Note on Accounting for Securitisation.

(iv) Guidance Note on Accounting for Equity Index and Equity Stock Futures and

Options.

The following is the text of the Accounting Standard.

Objective

1. The objective of this Standard is to establish principles for recognising and measuring

financial assets, financial liabilities and some contracts to buy or sell non-financial items.

Requirements for presenting information about financial instruments are in Accounting Standard

3 It may be noted that pursuant to Accounting Standard (AS) 29, Provisions, Contingent Liabilities and Contingent

Assets, becoming mandatory in respect of accounting periods commencing on or after 1-4-2004, all paragraphs of

AS 4 dealing with contingencies (viz. paragraphs 1(a), 2, 3.1, 4 (4.1 to 4.4), 5 (5.1 to 5.6), 6, 7 (7.1 to 7.3), 9.1

(relevant portion), 9.2, 10, 11, 12 and 16) were withdrawn except to the extent they deal with impairment of assets

not covered by other Indian Accounting Standards. For example, impairment of receivables (commonly referred to

as the provision for bad and doubtful debts), continued to be covered by these paragraphs of AS 4 [See

Announcement on ‘Applicability of AS 4 to impairment of assets not covered by present Indian Accounting

Standards’ (published in ‘The Chartered Accountant’, April 2004, pp. 1151)]. From the date of this Standard

becoming mandatory, the abovementioned paragraphs of AS 4 dealing with contingencies would stand withdrawn in

respect of impairment of assets also.

4 Limited Revision has also been made to AS 11 (revised 2003) to withdraw the requirements concerning ‘forward

exchange contracts’ from the standard.

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(AS) 31, Financial Instruments: Presentation. Requirements for disclosing information about

financial instruments are in Accounting Standard (AS) 32, Financial Instruments: Disclosures5.

Scope

2. This Standard should be applied by all entities to all types of financial instruments

except:

(a) those interests in subsidiaries, associates and joint ventures that are accounted

for under AS 21, Consolidated Financial Statements and Accounting for

Investments in Subsidiaries in Separate Financial Statements, AS 23,

Accounting for Investments in Associates, or AS 27, Financial Reporting of

Interests in Joint Ventures6. However, entities should apply this Standard to an

interest in a subsidiary, associate or joint venture that according to AS 21, AS

23 or AS 27 is accounted for under this Standard. Entities should also apply

this Standard to derivatives on an interest in a subsidiary, associate or joint

venture unless the derivative meets the definition of an equity instrument of the

entity in AS 31, Financial Instruments: Presentation

(b) rights and obligations under leases to which AS 19, Leases, applies. However:

(i) lease receivables recognised by a lessor are subject to the derecognition

and impairment provisions of this Standard (see paragraphs 15-37, 64,

65, 69-71 and Appendix A paragraphs A59-A75 and A104-A113);

(ii) finance lease payables recognised by a lessee are subject to the

derecognition provisions of this Standard (see paragraphs 43-46 and

Appendix A paragraphs A76-A82); and

(iii) derivatives that are embedded in leases are subject to the embedded

derivatives provisions of this Standard (see paragraphs 9-13 and

Appendix A paragraphs A47-A53).

(c) employers’ rights and obligations under employee benefit plans, to which AS

15, Employee Benefits, applies.

5 A separate Accounting Standard (AS) 32 on Financial Instruments: Disclosures is being formulated.

6 It may be noted that AS 21, AS 23 and AS 27, at present, make reference to Accounting Standard (AS) 13,

Accounting for Investments, with regard to the accounting for an investment in a subsidiary, associate and joint

venture in the separate financial statements, respectively. On this Standard becoming mandatory, AS 13 would

stand withdrawn except to the extent it relates to accounting for investment properties. Thus, accounting for an

investment in a subsidiary, associate and joint venture would no longer be covered by AS 13. The same would be

dealt with in AS 21, AS 23 and AS 27. Accordingly, Limited Revisions have also been made to AS 21, AS 23 and

AS 27.

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(d) financial instruments issued by the entity that meet the definition of an equity

instrument in AS 31, Financial Instruments: Presentation (including options

and warrants). However, the holder of such equity instruments should apply

this Standard to those instruments, unless they meet the exception in (a) above.

(e) (i) rights and obligations arising under an insurance contract as defined in the

Accounting Standard on Insurance Contracts7, other than an issuer’s rights

and obligations arising under an insurance contract that meets the definition of

a financial guarantee contract in paragraph 8.6, or (ii) a contract that is within

the scope of Accounting Standard on Insurance Contracts8 because it contains

a discretionary participation feature. However, this Standard applies to a

derivative that is embedded in a contract within the scope of Accounting

Standard on Insurance Contracts9if the derivative is not itself a contract within

the scope of that Standard (see paragraphs 9–13 and Appendix A paragraphs

A47–A53). Moreover, if an issuer of financial guarantee contracts has

previously asserted explicitly that it regards such contracts as insurance

contracts and has used accounting applicable to insurance contracts, the issuer

may choose to apply either this Standard or Accounting Standard on Insurance

Contracts10to such financial guarantee contracts (see Appendix A paragraphs

A5 and A6). The issuer may make that choice contract by contract, but the

choice made for each contract is irrevocable.

(f) contracts for contingent consideration in a business combination11. This

exemption applies only to the acquirer.

(g) contracts between an acquirer and a vendor in a business combination to buy or

sell an acquiree at a future date.

(h) loan commitments other than those loan commitments described in paragraph

3. An issuer of loan commitments should apply AS 29, Provision, Contingent

Liabilities and Contingent Assets, to loan commitments that are not within the

scope of this Standard. However, all loan commitments are subject to the

derecognition provisions of this Standard (see paragraphs 15–46 and Appendix

A paragraphs A59–A82).

7 A separate Accounting Standard on Insurance Contracts, which is being formulated, will specify the requirements

relating to insurance contracts.

8 ibid.

9 ibid.

10 ibid.

11 ‘Business combination’ is the bringing together of separate entities or businesses into one reporting entity.

At present, Accounting Standard (AS) 14, Accounting for Amalgamations, deals with accounting for contingent

consideration in an amalgamation, which is a form of business combination.