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Introduction to IAS 39

This Standard establishes principles for recognising and measuring financial assets, financial liabilities and some contract to buy or sell non-financial items.

This Standard:

  1. applies to all types of financial instruments unless they are specifically excluded;
  2. classifies financial assets into four categories and prescribes the accounting treatment under each category;
  3. requires an embedded derivative to be separated from the host contract and accounted for as a derivative if, but only if, it has characteristics that are not closely related to those of its hosts
  4. requires all derivative financial instruments to be reported on the balance sheet and measured at fair value, unless the derivative is designated as a hedge and meets the hedging criteria in the Standard;
  5. provides extensive guidance on the derecognition of financial assets and financial liabilities;
  6. outlines the circumstances under which financial instruments may be reclassified;
  7. requires the entity to assess at each balance date whether there is any objective evidence that a financial asset or group of financial assets is impaired; and
  8. designates three types of hedges and prescribes the accounting treatment for each type of hedge.

In adopting IAS 39 for application as NZ IAS 39 no changes have been made to the requirements of IAS 39.

Entities that comply with NZ IAS 39 will simultaneously be in compliance with IAS 39.


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