Recognition of financial instruments in accounting: harmonising Ukrainian practice with IFRS requirements

Abstract

The purpose of the study is to conduct an in-depth comparative analysis of the methodology for the recognition and classification of financial instruments within international and national accounting systems, as well as to develop a practice-oriented algorithm for harmonising the domestic methodology with the requirements of International Financial Reporting Standards. The relevance of the topic is driven by the growing complexity of financial markets, the expansion of derivative instruments, the development of hybrid contractual structures, and the increasing requirements for the quality of financial reporting in the context of the integration of the national accounting system into the international financial environment. The methodological foundation of the study is based on the methods of comparative analysis, theoretical generalisation, systematisation, structural-logical modelling, and the normative-interpretative approach. The study includes an analysis of the provisions of IFRS 9 Financial Instruments, IAS 32 Financial Instruments: Presentation, IFRS 7 Financial Instruments: Disclosures, IFRS 13 Fair Value Measurement, and National Accounting Standard (NAS) 13 Financial Instruments. The results of the study demonstrate that international and national standards are conceptually aligned in their definition of financial instruments, yet differ substantially in their approaches to classification, recognition, and the broader accounting methodology. Unlike the domestic model, the international framework is based on a principle-oriented approach that combines the assessment of the business model for managing financial assets with the analysis of contractual cash flow characteristics through the SPPI criterion (Solely Payments of Principal and Interest). The national system, in contrast, applies a classification model grounded in the legal and economic nature of financial instruments. The scientific novelty of the study lies in the development of an IFRS-oriented algorithm for the recognition and classification of financial instruments for national practice, which does not contradict the existing regulatory framework, but supplements it with analytical procedures aimed at enhancing professional judgement, improving the identification of complex financial instruments, and ensuring methodological convergence with international standards. Conclusions. The proposed algorithm makes it possible to consider the recognition of financial instruments not as an isolated technical procedure, but as a consistent methodological process encompassing contract identification, verification of compliance with the definition of a financial instrument, initial recognition, classification, analysis of economic substance, selection of the appropriate measurement approach, risk assessment, and disclosure in financial reporting. Its practical significance lies in the possibility of its application as an internal instrument of accounting policy for enterprises. This approach facilitates a gradual transition from a formalised accounting model for financial instruments toward a more analytically substantiated methodology focused on the economic substance of contractual rights and obligations. Further research should be directed toward the refinement of valuation methodologies for complex and hybrid financial instruments, the adaptation of the SPPI criterion for financial reporting transformation purposes, and the development of practical recommendations for the disclosure of risks associated with financial instruments.