What Is Non Derivative Financial Asset?

Non derivative financial assets involve another understanding of financial instruments, such as stocks, debt, cash and accounts receivable. tradition The basic financial instruments belong to non derivative financial assets.

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. Situation Issuers are often liabilities or equity capital listed in owners' equity. A commercial banks issue bonds, B insurance companies to buy, for A commercial banks, bonds are liabilities, but for B insurance companies, they are bond investments (financial assets). So far, from the perspective of accounting standards, financial instruments refer to contracts that form financial assets of enterprises and form financial liabilities or equity instruments of other units.

Why is the definition of financial instruments settled in the "contract"? This is because the initial existence of financial instruments involves the issuers and the receiving parties. The two sides concluded transactions in a contractual manner, and the termination of the contract was exactly the time when the corresponding financial instruments "disappeared". According to the definition of the above financial instruments, there are two types of financial instruments: one is basic financial instruments, the other is derivatives.

Let's start with basic financial instruments. Money (cash) is the basic financial instrument, and for the party holding it, Finance Assets. 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). Another example is whether a financial guarantee is a financial instrument. It represents a contractual right to borrow the direction of the guarantor to collect cash, and it is also a corresponding contractual obligation when the debtor defaults when the borrower pays the cash to the lender; the contractual rights and obligations exist in the past transactions or events (undertaking Security), even if the debtor can exercise this right and whether the guarantor must fulfill this obligation depends on whether the borrower will default in the future. Financial guarantee is also a financial instrument.