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Scope
The purpose of this Statement is to establish the
accounting standards for the recognition
and measurement of financial instruments. The scope of this
Statement includes contracts to buy or sell financial items as well
as contracts to buy or sell financial items which are not entered
into and held for the purpose of the receipt or delivery of a
non-financial item in accordance with the entity's expected
purchase, sale, or usage requirements.
Classification of Financial Assets
Financial assets should be classified into one of the following
categories:
1.
Financial assets at fair value through profit or loss, which
are measured at fair value with fair value changes recognized in
profit or loss.
2.
Available-for-sale financial assets, which are measured at
fair value with fair value changes recognized directly in equity,
through the statement of changes in equity.
3.
Held-to-maturity investments, which are measured at amortized
cost.
4.
Loans and receivables, which are measured at amortized cost.
Classification of Financial Liabilities
Financial liabilities should be classified into one of the following
categories:
1.
Financial liabilities at fair value through profit or loss,
which are measured at fair value with fair value changes recognized
in profit or loss.
2.
Other financial liabilities measured at amortized cost.
Embedded Derivative
Embedded derivative should be separated from the host under certain
conditions. If an embedded derivative is separated, the host
contract is accounted for under the appropriate standard and the
separated embedded derivative is accounted for the same as other
free standing derivatives.
Derecognition of Financial Assets and Extinguishment of Financial
Liabilities:
Statement no. 33 specifies the conditions for derecognition of
financial assets and extinguishments of financial liabilities.
Hedge Accounting
This statement permits hedge accounting under certain circumstances.
Categories of hedges include fair value hedge, cash flow hedge, and
hedge of currency risk of a net investment in a foreign operation. A
hedge of the foreign currency risk of a firm commitment may be
accounted for as a fair value hedge or as a cash flow hedge.
Besides, fair value hedge accounting for a portfolio hedge of
interest rate risk is also allowed.
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 Effective
date
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This Statement becomes effective for financial statements for the
fiscal year ending on and after December 31, 2006. Earlier adoption
is not allowed.
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