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Definition of Financial assets and financial liabilities

Financial Asset

A financial asset is defined as one of the following type of asset as per the Accounting Standards:

  • Cash
  • Equity instrument of another entity
  • A contractual right
  • To receive cash or another financial asset from another entity
  • To exchange financial assets or financial liabilities with another entity under conditions that are potentially favorable to the entity
  • A contract that will/may be settled in the entity’s own equity instruments and is
  • A non-derivative resulting in receiving a variable number of the entity’s own equity instruments
  • A derivative that will/may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of entity’s own equity instruments

Financial Liability

A financial liability is defined as one of the following type of liabilities as per the Accounting Standards:

  • A contractual obligation
  • To deliver cash or another financial asset to another entity
  • To exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity
  • A contract that will/may be settled in the entity’s own equity instruments and is
  • A non-derivative resulting in delivering a variable number of the entity’s own equity instruments
  • A derivative that will/may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of entity’s own equity instruments
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