financial instruments

A right to buy shares in the future would be an example

How are cash and trade receivable financial assets if we have to record there increase decrease through fair value through profit and loss I've never seen trade receivable and cash entered in sopl those are assets, sorry I'm asking silly questions

Not at all a silly question. However, I've just answered this question from you in a different forum and that is something that I do object to! Please refrain from multiple posting :-)

Hello sir! I don't understand on the concept of factoring of receivables. How do you deal with it in financial statements?

Invariably in the exam, it's not in fact a factored situation. Invariably the entity has "factored" its debts to a third party and received a percentage of the face value. But the question will then tell you - probably - that, if the debt is not collected within 3 months, the debt will revert back to the entity. The double entry that HAS been effected therefore needs to be reversed and the correct double entry put through. This is, in effect, a loan situation so the correct double entry will be to reverse the original .... ....probably this will mean: Dr Receivables (full amount of receivables "sold" through this "factoring") Cr Administrative expenses (where the "balancing figure" will have previously been debited) Cr Cash (amount of cash received) and now put through the correct entry: Dr Cash (amount of cash received) Cr Loan (amount of cash received) Does that solve your problem?

Yes I got the point. But is there any different accounting treatment for the company which bears risks & responsibilities and the company which doesn't? If so,can you please guide me?

If the transaction is a genuine factoring transaction, the double entry would be: Dr Cash (amount actually received) Dr Finance Costs (probably) (the amount of the difference between the face value of the Receivables and the amount of cash received) Cr Receivables (the face value of the receivables that have now been factored) OK?

Now I understand. Thank you.

You're welcome

Yes I got the point. But when I look into the past papers,there are some questions regarding if the company bears risks & responsibilities or if it doesn't. So my question is are there different treatments for each of them,and please explain me with the help of June 2011 exam Qn 2 note no 6 Highwood.

Basically the middle line in note vi says it all ..."Any of the factored receivables ....." tells you that risks and rewards have NOT been transferred and the greatest risk attaching to receivables is the risk of non-collection. And that risk remains firmly with Highwood

Owh..it now cleared my doubts. Thanks a lot,sir.

You're welcome