Financial asset

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A financial asset is an intangible asset that derives value because of a contractual claim. Examples include bank deposits, bonds, and stocks. Financial assets are usually more liquid than tangible assets, such as land or real estate, and are traded on financial markets.[1 [! [" [# According to the $nternational Financial %eporting &tandards '$F%&(, a financial asset is defined as one of the follo)ing*

Cash or cash equivalent; Equity instruments of another entity; Contractual right to receive cash or another financial asset from another entity or to exchange financial assets or financial lia ilities !ith another entity under conditions that are potentially favoura le to the entity; Contract that !ill or may e settled in the entity"s o!n equity instruments and is either a non#derivative for !hich the entity is or may e o liged to receive a varia le num er of the entity"s o!n equity instruments, or a derivative that !ill or may e settled other than y exchange of a fixed amount of cash or another financial asset for a fixed num er of the entity"s o!n equity instruments$%&'

Treatment of financial assets under IFRS

Recognition and measurement of financial assets under IFRS
+nder $F%&, financial assets are classified into four broad categories )hich determine the )ay in )hich they are initially measured*

Financial assets held for trading, i$e$ !hich !ere acquired or incurred principally for the purpose of selling, are part of a portfolio !ith evidence of short#term profit#taking or are derivatives, are measured at fair value through profit or loss$ Financial assets !ith fixed or !ith determina le payments and fixed maturity !hich the company has to e !illing and a le to hold till maturity are classified as (held#to#maturity investments($ )eld#to#maturity investments are either measured at fair value through profit or loss y designation or determined to e financial assets availa le for sale y designation$ Financial assets !ith fixed or determina le payments !hich are not listed in an active market are considered to e loans and receiva les$ *oans and receiva les are also either measured at fair value through profit or loss y designation or determined to e financial assets availa le for sale y designation$

+ll other financial assets are categori,ed as financial assets availa le for sale and are measured at fair value through profit or loss y designation$ %-'

For financial assets to be measured at fair value through profit or loss by designation, designation is only possible at the amount the asset )as initially recogni,ed at. -oreover, designation is not possible for equity instruments )hich are not traded in an active market and the fair value of )hich cannot be reliably determined. Further 'alternative( requirements for designation are e.g. at least a clear diminution of a .mismatch. )ith other financial assets or liabilities,[/ an internal valuation and reporting and steering at fair value,[0 or a combined contract )ith an embedded derivative )hich is not immaterial and )hich may be separated.[1 %egarding financial assets available for sale by designation, designation is only possible at the amount the asset )as initially recogni,ed at as )ell. 2o)ever, there are no further restrictions or requirements.