A general definition/description is:
A financial asset is a tangible liquid asset that gets its value from a contractual claim. Cash, stocks, bonds, bank deposits and the like are examples of financial assets. Unlike land, property, commodities or other tangible physical assets, financial assets do not necessarily have inherent physical worth. See also general information on Wikipedia:
For IFRS financial reporting purposes financial assets exclude cash and cash equivalents, trade and other receivables, biological assets carried at fair value through profit or loss and investments in associates.
In general under IFRS financial assets comprise:
- Financial assets at amortised cost
- Financial assets at fair value through profit or loss;
- Financial assets at fair value through other comprehensive income;
- Derivatives in a hybrid contract that contains a financial asset, as the host, in the scope of IFRS 9 [IFRS 9 4.3.2];
- Loans and receivables (IAS 39, deleted in IFRS 9, but may be voluntarily used);
- Held-to-maturity financial assets (IAS 39, deleted in IFRS 9, but may be voluntarily used);
- Available-for-sale financial assets (IAS 39, deleted in IFRS 9, but may be voluntarily used).
Other commonly used names for IFRS financial assets comprise:
- Investments in associates and joint arrangements (valued using the equity method);
- Other investments (valued at amortised cost or using the equity method).
Classification of financial assets:
IAS 32 Financial Instruments: Presentation
A financial asset is any asset that is:
- an equity instrument of another entity;
- a contractual right:
- to receive cash or another financial asset from another entity; or
- to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity; or
- a contract that will or may be settled in the entity’s own equity instruments and is:
- a non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or
- a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose the entity’s own equity instruments do not include puttable financial instruments classified as equity instruments in accordance with IAS 32 paragraphs 16A and 16B, instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation and are classified as equity instruments in accordance with IAS 32 paragraphs 16C and 16D, or instruments that are contracts for the future receipt or delivery of the entity’s own equity instruments.