theajojohn

Financial instruments shall be measured and recognised based on the intention to hold or dispose the instrument of benefits from its cashflow from its capital appreciation or contractual cashflow. Where the intention is to hold till maturity, and obtain benefits from the contractual cashflow in form of interest or dividend then it is measured and recognised in ACM i.e, amortised cost method.  Where the intention is to hold for few periods and obtain benefits from the sale of asset in form of capital appreciation then it is measured and recognised in FVTOCI i.e. Fair value through other comprehensive income. Where the intention is to not hold and just obtain benefits from the sale of asset in form of capital appreciation then it is measured and recognised in FVTPL i.e. Fair value through profit and loss. Financial liabilities are generally measured in acm method. Usually only equity instruments and derivatives are disclosed in FVTPL. It maybe noted that, equity instruments can be di...

Financial instruments are contractual instrument which when executed becomes, an asset in the books of one entity and liability in the books of another enitity (where both the entities are party to the contract). On analysis of the definition we will come to understand that, a financial instrument has following characteristics: Contractual instument Financial obligation or right Financial assets are :  Cash and Bank Balance  Right to receive cash Equity instuments in other entity Right to receive equity instruments in other entity  Derivative contracts, favourable for entity Financial liabilities are :  Obligation to deliver cash Obligation to deliver other financial assets Obligation to deliver variable number of own equity Derivative contracts, unfavourable for entity Equity instruments are the instruments which gives residual interest in the net worth of the entity or it is contractual obligation to deliver a fixed number of equity shares. We should note that, sta...