Initial Recognition and Measurement: What to Do When You First Record a Financial Instrument

The moment you enter into a contract involving money, whether it’s a loan, a sale on credit, or an interest-free advance, you need to recognise it in your accounting records. Section 11 of the IFRS for SMEs tells you exactly when and how to do this. In this article, we explain the rules for initial recognition and measurement of financial instruments in simple terms. You’ll learn how to record trade receivables, loans, and financing transactions correctly, and how to apply present value when needed. With practical examples and clear guidance, this article helps you get the basics right from day one.