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Under Ind AS 109, an entity recognises a financial asset or financial liability in its balance sheet when:
AThe entity has obtained the regulatory approval to settle the instrument
BThe entity becomes party to the contractual provisions of the instrument
CCash is paid or received for the instrument
DThe instrument matures or settlement is due
Answer & Solution
Correct answer: B. The entity becomes party to the contractual provisions of the instrument
Para 3.1.1 — the recognition trigger is becoming PARTY TO the contractual provisions, not the timing of cash settlement. For example, a firm purchase commitment is recognised when both parties are bound under the contract, even if payment occurs later.
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