PAS 32 & 39: Financial Instruments - Summary of Requirements

To Our Clients and Friends

Philippine Accounting Standard (PAS) 32, Financial Instruments: Disclosure and Presentation, and PAS 39, Financial Instruments: Recognition and Measurement, are two of the new PASs issued by the Accounting Standards Council that became effective on January 1, 2005.

PAS 32 and PAS 39 apply to financial instruments. And financial instruments could include ordinary assets and liabilities, such as cash, trade receivables and payables, accrued expenses and shares of stock, which all companies have. Or they could be assets or liabilities arising from complex instruments such as derivatives or compound contracts.

Understanding and implementing PAS 32 and PAS 39 may not be easy, especially for companies that will apply the Standards for the first time. To assist P&A clients and friends, the Firm has prepared this Accounting Alert which presents, among other things, discussions on: the types and classes of financial instruments and common examples; timing and amount of initial recording; measurement of carrying values after initial recording and recognition of any gains or losses; and required disclosures. To provide additional guidance for banks and other financial institutions in implementing the Standards, we have also attached an Appendix to this Accounting Alert which summarizes the more significant issues unique to these entities.

We shall be glad to assist you in understanding the requirements of PAS 32 and PAS 39 and implementing them properly in your respective organizations.