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New Member
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Sep 30, 2011, 06:30 PM
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Cash is a financial asset, what is its respective financial liability/ equity?
According to IFRS "Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity interest of another entity"
E.g. For notes receivable as a financial asset, we have respective notes payable from another company as a financial liability. How about cash as a financial asset? What is its respective financial liability/ equity?
I am very confused with this question. Thanks!
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New Member
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Feb 3, 2014, 08:27 PM
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I supposed they mean that a Financial Instrument is a contract that generates a financial asset in one entity and a fiancial liability or Equity in another. Cash is a financia asset, but not a financial instrument. The contract exchanges cash now from entity 1 now and forces Entity 2 to deliver cash later (plus a penalty - interest) or distribute it as dividend or residual interest (Equity). In the end I understand that the exchange of cash (a financial asset) for a liability (debtinstriment) or equity is performed via a contract that somehow promisses to return the monies or participation in the net incomes, and that this contract is called a Financial Instrument. I also guess that "Bonds" really is not per se a liability, but a contract. It is a liability to the issuig party, but an asset to the acquiring entity. Cash was the primordial financial asset, exchanged not for a product or service, but to be returned with interest. In the case of equity, cash is exchanged to claim a piece of all future incomes... I guess...
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New Member
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Feb 3, 2014, 08:33 PM
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CAsh is a financial asset, not a financial instrument.
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