What Is Non Derivative Financial Asset?

Non derivative financial assets involve another understanding of financial instruments, such as stocks, debt, cash and accounts receivable, all of which are traditional.

In real life, financial instruments can be seen everywhere.

For example, it is easy for you to think of the investment instruments such as bonds or stocks on the market, and you even think about the risk of investment in financial instruments or "stuck".

However, from the perspective of financial instruments accounting standards, it is necessary to define financial instruments.

Just because people see the term "financial tool" easy to think of stocks or bonds investment, some people simply define financial instruments as some financial assets held by enterprises.

In fact, if you stand on the side of the issuance of financial instruments, the holders of financial instruments are assets.

Why is the definition of financial instruments settled in the "contract"? This is because the initial existence of financial instruments involves issuers and acceptor.

Let's start with basic financial instruments.

Money (cash) is a basic financial instrument, and it is also a financial asset for the holder.

It represents the medium of exchange and can be simply understood as a contract between the holder and the government (issuer).

Deposits in banks or similar financial institutions are also basic financial instruments (assets), representing a contractual right of depositors, that is, depositors have the right to obtain cash from the institution, or to issue checks or similar instruments based on their balance of deposits to pay financial liabilities.

Second, basic financial instruments such as accounts receivable and accounts payable, bills receivable and notes payable, bonds receivable and bonds payable, other receivables and other payable, long-term equity investments and capital stock can be found in pairs.

In addition, some basic financial tools will be difficult to judge.

For example, are financial leasing and operating leases all basic financial instruments? Financial leasing contracts are basically regarded as the right of the lessor to obtain continuous income, and the obligation of the lessee to pay continuously. This series of payments is essentially the same as the payment of principal and interest under the loan agreement. The lessor calculates the investment in the lease contract rather than the accounting of the leased assets themselves.

Business leasing is somewhat different. It is basically considered to be an uncompleted contract, requiring the lessor to provide assets to the lessee in the future in exchange for the consideration of similar service charges, and the Lessor will continue to account for his leased assets.

Therefore, financial leasing is considered to be a financial instrument while operating lease is not a financial instrument (except for receivable or payable due).