Definitions

Question 1

financial instrument

Answer 1

-Any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument of another entity.

Question 2

Financial asset

Answer 2

Any asset that is;

• cash
• An equity instrument of another entity
• A contractual right:
• to receive cash or another financial asset from another asset; or
• to exchange financial assets or financial liabilities with another entity under conditions that are potentially favorable to the entity.

Question 3

Financial liability

Answer 3

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 unfavorable to the entity.