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
Equity (finance) Derivative (finance) Share (finance)
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