Financial Instruments

Question 1

What is financial instrument?

Answer 1

Any contract that gives rise to financial asset of one entity and financial liabiltiy or equity instrument of another entity

Question 2

What is a financial asset?

Answer 2

a. Cash
b. Equity instrument of another entity
c. Contractual right to cash or FA OR exchange FA/FL for potential favor to entity
d. non-derivative entity own equity variable number

Question 3

Physical assets ,right of use asset, intangible asset are FA?

Answer 3

No they are not FA as they do no give present right to receive cash or another FA.

Question 4

Are Prepaid expenses,deferred revenue, most warraty obligations FA?

Answer 4

No they are not FA as the future economic benefit is goods or services rather than FA

Question 5

Are Perpetual debt instruments FA?

Answer 5

Yes they are FA as the holder has right to receive payments on account of interest at fixed dates into indefinite future.

Question 6

What is a Equity Instruments?

Answer 6

No contractual obligation to deliver cash or FA to exchange FA or FL with another entity