Financial Instrument

CHAPTER 1

INTRODUCTION

The world economic frame has suffered in the past few years a foreseeable and irreparable process of transformation. The main directions of these changes are directed to the globalization of the markets, the technological process, the informational and communication system, the extension of the borders and to a series of reforms from the social and fiscal area that have given this context of reference more complex and more unstable. These new modifications have transformed the borders of the markets, cancelling the physical and geographical distances as well as the commercial and financial barriers, allowing the free circulation of goods services, capitals and information.

At present, the set of (IAS/IFRS issued by International Accounting Standard Board (IASB) includes 4 standards regarding disclosure, presentation, classification, recognition and valuation of financial instruments such as IAS 32 Financial Instruments: Presentation, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 9 Financial Instruments: Classification and Measurement.

IAS 32 - Financial instruments: Presentation that treats all the types of the financial instruments, recognized and not recognized and it must applied for the contracts for the sale and the purchase of a non-financiers element that can be discounted in cash through another financial instrument or through a change of financial instruments, as the contracts would be financial instruments. According to the IAS 32, the financial instrument is any contract that leads to a financial asset of an entity, as well as to a financial instrument of equity ownership or of debts of another society.

The description of the just value of the financial instruments can be found in the IAS 39 Financial Instruments: Recognition and Measurement which treats issues of recognition and the assessment of the financial instruments. This standard sets the recognition principles, evaluation and presentation of the information on the financial instruments from the financial statements, standard that increases significantly the use of the just value in the accounting of the financial instruments, especially in the asset part of the balance. IAS 39 distinguishes four classes of financial assets, more specific the assets owned at their just value in the profit and loss account, the available assets for the sale of the assets held until the due time and the loans and debts. Moreover, it identifies two classes of financial debts, those for the just value and the debts presented at the normalised cost. The specific accounting approach for each case classifies and establishes the accounting treatment for three types of security against risks: just value, cash flow and the investments.

IFRS 7's objective is to provide