Financial instrument
Under a financial instrument to all contractual claims and obligations are to be understood, which have a direct or indirect exchange of cash for the subject. Arising from contracts or agreements rights or obligations have to be based on financial matters.
The International Accounting Standards ( IAS ) and International Financial Reporting Standards ( IFRS) define in IAS 32.11 a financial instrument as follows:
Classification
Financial instruments can be in accordance with International Accounting Standard 39 (IAS 39) divided as follows:
Financial assets
The description of a financial asset in accordance with IAS 32.11 includes the following items and rights:
- Cash or cash equivalents (cash),
- An equity instrument of another entity,
- A contractual right To receive cash or another financial asset from another entity or
- Financial assets or financial liabilities with another entity under conditions that are potentially favorable exchange.
- A non- derivative financial instrument contains an obligation of the company, or may involve, to receive a variable number of its own equity instruments.
- A derivative financial instrument is to be met in some other way or can than by the exchange of a fixed amount or another financial asset for a fixed number of own equity instruments.
Financial liabilities
A financial liability or a liability is in contrast
- A contractual obligation cash or another financial asset to be delivered to another company.
- To exchange financial assets or financial liabilities that are potentially unfavorable terms with another company.
- A non- derivative financial instrument contains an obligation of the company, or may involve, to deliver a variable number of its own equity instruments.
- A derivative financial instrument is to be met in some other way or can than by the exchange of a fixed amount or another financial asset for a fixed number of own equity instruments.
Equity instruments
An equity instrument ( equity instrument ) IAS 32 and IAS 39, a contractual agreement, which has a residual interest in the assets of an entity after deducting all liabilities to the object. In accordance with IAS 39.9, a derivative is present when a financial instrument
- The value depends on an underlying asset or underlying ( interest rate, equity, foreign currency, etc.).
- Compared to other instruments that respond similarly to changes in market conditions, no or only a small net investment is necessary.
- The due date is in the future.
Financial Statements
The classification of financial instruments is important for the measurement and recognition in the IFRS financial statements:
- Financial assets
- Financial obligations
- Equity instruments
- Trade
- Financial assets that are to be held to maturity
- Loans and receivables
- Available-for- sale financial assets