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A financial asset is any asset that is:
• ‘cash
• an equity instrument of another entity
• a contractual right to receive cash or another financial asset from
another entity
• a contractual right to exchange financial instruments with another entity under conditions that are potentially favourable to the entity
• a non-derivative contract for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments’ (IAS 32, para 11).
A financial liability is any liability that is a:
• ‘contractual obligation to deliver cash or another financial asset to
another entity
• contractual obligation to exchange financial instruments with another entity under conditions that are potentially unfavourable
• a non-derivative contract for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments.’ (IAS 32, para 11).Q) Speaking of the definitions, what is a non-derivative contract? and why did they specify that part of a variable number of the entity’s own equity instruments?
Thank you
E.g. a contract that will be satisfied by the delivery of $10,000 worth of shares (so the number will be variable)
ah is this because if the number of shares is fixed, it would be a financial equity wouldn’t it?
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