Now that you understand what a financial instrument is, the next step is to learn how to classify it correctly. This matters because your choice affects how the item is measured, disclosed and tested for impairment. Section 11 of the IFRS for SMEs separates financial instruments into two types: basic and complex. In this article, we explain how to tell the difference in simple terms. We guide you through the rules step by step, using clear examples and everyday situations. By the end, you will feel confident about knowing which part of the standard to apply.

You might think financial instruments are something only corporate giants and investment analysts need to worry about, but if you're raising invoices, paying suppliers, or reviewing AFS under the IFRS for SMEs, you're already deep in that territory. Section 11 of the Standard draws a firm line between basic and complex financial instruments, and understanding this split is essential to getting classification, measurement, and disclosures right. This article breaks down the jargon into plain English and shows why even a local bakery’s overdraft matters when it comes to compliance and professional judgement.