Professional Documents
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Financial Assets
A financial asset is any asset that is
a. Cash
b. A contractual right to receive cash or another financial asset from another
entity.
c. A contractual right to exchange financial instrument with another entity
under conditions that are potentially favorable. An example is an option
held by the holder to purchase shares in a specified company at less than
market price.
d. An equity instrument of another entity.
The following physical assets are not financial assets because it does not give
rise to a present right to receive cash or another financial asset:
a.
b.
c.
d.
Prepaid Expenses
Inventory
Property, Plant and Equipment
Intangible Assets
Trading securities
Available for sale securities
Held to maturity securities
Loans and receivables
Non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market.
Financial Liabilities
A financial liability is any liability that is a contractual obligation:
a. To deliver cash or other financial asset to another entity
Trade accounts payable
Notes payable
Loans payable
Bonds payable
b. To exchange financial instruments with another entity under conditions
that are potentially unfavorable
The following are not financial liabilities because the outflow of economic
benefits associated with them is the delivery of goods and services rather than a
contractual obligation to pay cash or another financial asset.
a. Deferred revenue
b. Warranty obligations
May 2009