CFM16250 - Accounting for financial instruments: IAS 32 and IAS 39: recognition of financial assets and financial liabilities

Recognition

A company must recognise a financial asset or financial liability on its balance sheet when, and only when, it becomes a party to the contractual provisions of the instrument.

The application guidance in IAS 39 provides examples of this principle. For example, if a company receives a firm order for goods from a customer, it should delay recognition of the trade debt until at least one of the parties has performed under the agreement – which will normally be when the goods are shipped or delivered.

In contrast, however, a forward contract or option is recognised on the commitment date.