IAS 32 deals with the definition of a financial asset and a financial liability and amplifies the classification of financial liability and equity. The classification between financial liabilities and equity components is extremely important as it affects the manner in which the financial instruments are presented in the balance sheet. Also the income and expenses arising on account of such financial instruments affect the profit and loss account depending upon the classification. IAS 32 throws light on the issues about the presentation of interest and dividends.