- Cash
- A contractual right:
To receive cash or another financial asset; or
To exchange financial assets or financial liabilities under
potentially
favourable conditions; or
A financial asset and a financial liability must be offset and the net
amount presented in the statement of financial position when, and
only when, an entity (AASB 132):
The standard setters have tried to require fair value through P&L for
all financial instruments.
The classifications mean that some financial instruments are
treated differently. This affects the amounts of financial assets and
liabilities reported in the statement of financial position, and the
reported financial results.
For some entities, the classifications make a big difference to their
financial reports.
Changing the classifications also changes the financial results for
example shifting financial instruments from FV though P&L to FV
through OCI or to Amortised cost.
- AASB 9, 132 & 139 definitions of fair value all refer to AASB
13 Fair value measurement
Swaps are:
- Agreements in which two counterparties undertake to exchange a
series of future cash flows
Major types of swaps: - Interest rate swap:
- An agreement between two parties to exchange interest payments
for a specific period, related to an agreed principal amount
- Currency swap:
- Future cash flows calculated using an interest rate in one currency
are swapped for future cash flows calculated using an interest rate
in another currency