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IAS 39 Financial Instruments: Recognition and Measurement

IAS 39 is the international accounting standard, established by the International Accounting Standards Board (IASB), which sets out the requirements for recognising and measuring financial assets and liabilities, as well as some of the contracts to buy and sell non-financial items.

In this respect, IAS 39 also establishes the conditions to apply hedge accounting as well as the procedures for its application.

According to IAS 39, financial instruments are recognised in the financial statement when the organisation is a party to the financial instrument contract. Financial liabilities are removed from the statement when the obligation established in the contract extinguishes. In the case of financial assets, these are removed from the financial statement when the entity’s contractual rights to the asset’s cash flows expire.

Financial assets and liabilities are initially measured at fair value. During the life of the instruments, they can be measured at amortised cost or at fair value, depending on the category of the financial instrument.

In 2014, IAS 39 was replaced by IFRS 9.