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According to IFRS 9 A financial instrument is a contract that give rise to financial asset of one company and financial liability or equity instruments of another company.
IAS 32 Financial Instruments: Presentation outlines the accounting requirements for the presentation of financial instruments, particularly as to the classification of such instruments into financial assets, financial liabilities and equity instruments. The standard also provide guidance on the classification of related interest, dividends and gains/losses, and when financial assets and financial liabilities can be offsetaaa
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Financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. for example when an invoice is issued on the sale of goods on credit the entity that has sold the goods has a financial asset- the receivable while the buyer has to account for a financial liability- the payable.
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Financial instruments are negotiable instruments or trade which is one of the assets of any kind, whether in cash or evidence of ownership of the entity, or a contractual right to receive or deliver, cash or other financial instrument.
In accordance with international standards for financial reporting No. 32 and 39, and is defined as "any contract that gives a certain financial assets and financial responsibility for the entity or equity instrument of another entity."
