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    Financial Asset

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    gabby209
    A financial asset is a non-physical asset whose value is derived from a contractual claim or ownership in another entity. Financial assets include bank deposits, bonds, and shares in companies. They are usually more liquid than tangible assets like real estate. Under International Financial Reporting Standards, financial assets are classified into four categories: assets held for trading, held-to-maturity assets, loans and receivables, and assets available for sale. Each category determines how the assets are measured and reported.

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    Financial Asset

    Uploaded by

    gabby209
    24 views2 pages
    A financial asset is a non-physical asset whose value is derived from a contractual claim or ownership in another entity. Financial assets include bank deposits, bonds, and shares in companies. They are usually more liquid than tangible assets like real estate. Under International Financial Reporting Standards, financial assets are classified into four categories: assets held for trading, held-to-maturity assets, loans and receivables, and assets available for sale. Each category determines how the assets are measured and reported.

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    A financial asset is a non-physical asset whose value is derived from a contractual claim or ownership in another entity. Financial assets include bank deposits, bonds, and shares in companies. They are usually more liquid than tangible assets like real estate. Under International Financial Reporting Standards, financial assets are classified into four categories: assets held for trading, held-to-maturity assets, loans and receivables, and assets available for sale. Each category determines how the assets are measured and reported.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    24 views2 pages

    Financial Asset

    Uploaded by

    gabby209
    A financial asset is a non-physical asset whose value is derived from a contractual claim or ownership in another entity. Financial assets include bank deposits, bonds, and shares in companies. They are usually more liquid than tangible assets like real estate. Under International Financial Reporting Standards, financial assets are classified into four categories: assets held for trading, held-to-maturity assets, loans and receivables, and assets available for sale. Each category determines how the assets are measured and reported.

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    Financial asset

    A financial asset is a non-physical asset whose value is derived from a contractual claim, such as bank
    deposits, bonds, and participations in companies' share capital. Financial assets are usually more liquid than
    tangible assets, such as commodities or real estate.[1][2][3]

    The opposite of financial assets is non-financial assets, which include both tangible property (sometimes
    also called real assets) such as land, real estate or commodities, and intangible assets such as intellectual
    property, including copyrights, patents, trademarks and data.

    Types
    According to the International Financial Reporting Standards (IFRS), a financial asset can be:

    Cash or cash equivalent,


    Equity instruments of another entity,
    Contractual right to receive cash or another financial asset from another entity or to
    exchange financial assets or financial liabilities with another entity under conditions that are
    potentially favorable to the entity,
    A contract that will or may be settled in the entity's own equity instruments and is either a
    non-derivative for which the entity is or may be obliged to receive a variable number of the
    entity's own equity instruments, or a derivative that will or may be settled other than by
    exchange of a fixed amount of cash or another financial asset for a fixed number of the
    entity's own equity instruments.[4]

    Treatment of financial assets under IFRS


    Under IFRS, financial assets are classified into four broad categories which determine the way in which
    they are measured and reported:

    Financial assets "held for trading" — i.e., which were acquired or incurred principally for the
    purpose of selling, or are part of a portfolio with evidence of short-term profit-taking, or are
    derivatives — are measured at fair value through profit or loss.
    Financial assets with fixed or with determinable payments and fixed maturity which the
    company has to be willing and able to hold till maturity are classified as "held-to-maturity"
    investments. Held-to-maturity investments are either measured at fair value through profit or
    loss by designation, or determined to be financial assets available for sale by designation.
    Financial assets with fixed or determinable payments which are not listed in an active
    market are considered to be "loans and receivables". Loans and receivables are also either
    measured at fair value through profit or loss by designation or determined to be financial
    assets available for sale by designation.
    All other financial assets are categorized as financial assets "available for sale" and are
    measured at fair value through profit or loss by designation.[5]

    For financial assets to be measured at fair value through profit or loss by designation, designation is only
    possible at the amount the asset was initially recognized at. Moreover, designation is not possible for equity
    instruments which are not traded in an active market and the fair value of which cannot be reliably
    determined. Further (alternative) requirements for designation are e.g. at least a clear diminution of a
    "mismatch" with other financial assets or liabilities,[6] an internal valuation and reporting and steering at fair
    value,[7] or a combined contract with an embedded derivative which is not immaterial and which may be
    separated.[8] Regarding financial assets available for sale by designation, designation is only possible at the
    amount the asset was initially recognised at as well. However, there are no further restrictions or
    requirements.

    See also
    Security (finance)
    Financial accounting
    Financial statements

    References
    1. Chen, James (20 November 2003). "Financial Asset" (http://www.investopedia.com/terms/f/fi
    nancialasset.asp#axzz1aitM9hP7). Investopedia. Dotdash. Retrieved 2 December 2016.
    2. "What are Financial Assets?" (https://web.archive.org/web/20160304130702/http://financeca
    reers.about.com/od/glossary/g/finassets.htm). The Balance. Dotdash. Archived from the
    original (http://financecareers.about.com/od/glossary/g/finassets.htm) on 4 March 2016.
    Retrieved 2 December 2016.
    3. "Financial assets" (http://financial-dictionary.thefreedictionary.com/Financial%20Assets).
    The Free Dictionary. Retrieved 2 December 2016.
    4. International Accounting Standard (IAS) 32.11
    5. International Accounting Standard (IAS) 32.9
    6. International Accounting Standard (IAS) 32.9b i
    7. International Accounting Standard (IAS) 32.9b ii
    8. International Accounting Standard (IAS) 32.11a

    Retrieved from "https://en.wikipedia.org/w/index.php?title=Financial_asset&oldid=1151805547"

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