chapter 11 - financial instruments

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• When is a financial instrument an equity instrument according to IAS32? An equity instrument includes no obligation to deliver cash of financial assets
• Define a financial asset. A right to receive cash, equity instruments, cash. Monetary assets is not included
• What are the three classes of subsequent measures of financial assets? At fair value through P&L, at fair value through OCI, at amortized cost. At value in use through statements of changes in equity is not included
• Define an equity instrument. A residuals interest in assets minus liabilities
• How must the initial measurement of financial instruments be performed? At fair value
• What is the effective interest method? The interest rate that equals the discounted future cash receipts to the initial carrying amount of the asset
• How must redeemable preference shares be presented and why? Liabilities, because the shareholders have the right to require payments
• Define a financial liability. A contractual obligation to deliver cash
• What are the three classes of risk in IFRS7 that should be considered in the footnotes. The risk an entity will have difficulties meeting obligations related to financial liabilities, the risk that one party to a financial instrument will cause a loss by failing to honor the obligation, the risk that the fair value will fluctuate because of changes in market prices. The risk holders of quoted financial instruments will sell at the same time and depress the value of the instrument is not included
• How is the liability part in a compound financial instrument calculated (ex: a loan that is convertible to ordinary shares)? It should be separated in a liability part and an equity part based on a calculation

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