Additional Flashcards
What is a derivative?
Derives it’s value from value of an underlying asset, price, rate or index
What are the characteristics of a derivative?
Value changes in response to changes in underlying item
Requires little or no initial investment
Settled at a future date
How do you value a derivative?
On date of recognition: fair value is nil
At each reporting date: restated to fair value and recorded as financial asset or liability
What is a bond?
Debt security, in which the issuer owes the holders a debt and is obliged to pay interest and/or repay the principal at a later date.
Formal contract to repay borrowed money with interest at fixed intervals
What are bond holders?
Lenders of debt finance
What do u exclude in the gearing calculation?
Deferred tax
If there is an increase in deferred tax how do we account for it?
Debit deferred tax provision
How do you calculate cost of capital for a preference share?
Annual preferred dividend/market value
