- This topic has 1 reply, 2 voices, and was last updated 6 years ago by
.
- Posts
Dear Chris,
Hope you are fine and thank you for your lectures on financial instrument.
I have a very short question about financial instrument. According to IAS 32 financial instrument is something that gives rise to a financial asset of one party and financial liability or equity instrument of another party.
Well, I am completely happy with this definition for receivables, payables, loans, shares, etc but what about CASH ?! Why it is a financial instrument ?!
If our company has some cash, it is obvious that it is the financial asset of our company, but CASH is financial liability or equity instrument of who?!!!!! I feel “cash” only satisfies the first part of the financial instrument definition. Why I am wrong?!Hope my question is clear.
Thanks.Hi,
Don’t forget that we are looking in two companies for there to be a financial instrument. So we have the cash from the contract, so there will therefore be financial liability or equity in the other company books.
Personally, I’d not got overly concerned with it as provided you’re happy with the accounting for the investment in shares, investment in debt, issue of debt including convertibles then you will be fine.
Thanks
- You must be logged in to reply to this topic.