Financial Assets Examples

Financial asset, also referred as financial instruments are the different liquid assets which derive their value from any contractual claim and examples of which includes cash in hand, certificate of deposit, loan receivables,  marketable securities, bonds, stocks, mutual funds, etc.

Examples of Financial Asset

A Financial Asset, also has known as financial instruments or securities, is not a physical asset but is part of the intangible asset of an entityIntangible Asset Of An EntityIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more. They derive their value from the contractual claim. It can be readily and easily converted to cash. Some are bank balance, shares, short-term investments, treasury billsTreasury BillsTreasury Bills or a T-Bill controls temporary liquidity fluctuations. The Central Bank is responsible for issuing the same on behalf of the government. It is given at its redemption price and a discounted rate and is repaid when it reaches maturity.read more, etc.

It is usually represented as a certificate, receipts, or another legal document. Financial assets are often created by or related to the lending of money. They are widely used to finance real estate and the ownership of tangible assetsTangible AssetsAny physical assets owned by a firm that can be quantified with reasonable ease and are used to carry out its business activities are defined as tangible assets. For example, a company's land, as well as any structures erected on it, furniture, machinery, and equipment.read more.

Financial Assets Examples

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List of Financial Assets Examples

Financial Assets Examples

source: Microsoft SEC Filings

Below is the list of Financial Asset Types and examples –

  1. Cash or cash equivalentCash Or Cash EquivalentCash and Cash Equivalents are assets that are short-term and highly liquid investments that can be readily converted into cash and have a low risk of price fluctuation.  Cash and paper money, US Treasury bills, undeposited receipts, and Money Market funds are its examples. They are normally found as a line item on the top of the balance sheet asset. read more like a bank balance,
  2. Equity instruments of another entity. It is the shareholder/investors’ claim for the ownership of the company.
  3. Bond:Bond:A bond is financial instrument that denotes the debt owed by the issuer to the bondholder. Issuer is liable to pay the coupon (an interest) on the same. These are also negotiable and the interest can be paid monthly, quarterly, half-yearly or even annually whichever is agreed mutually.read more this is a claim upon interest payments and principal in the future. It could be a financial asset for companies like a bank, or else it is a liability for companies.
  4. Loan: In the above example, we have taken a bond as a financial asset. Likewise, loans are treated as a financial asset for companies like banks where the sale of such loans brings assets.
  5. Insurance: the worth of financial assets pays out if the terms of the contract are met. Like if a company pays a premium for its car and car break downs, then the financial asset will pay off.
  6. Legal & contractual right so that the entity can receive cash from other entity
  7. A financial asset like securities for a loan from other entity
  8. Under favorable conditions, the entity has the right to exchange financial assets or liabilities with other entities. Such rights are financial assets for the entity.
  9. Any contract that may be settled with equity instruments of the entity,
  10. Any non-derivative instrument for which the entity is obliged to receive some equity instruments of its entity;
  11. Any derivative that may be settled for cash or any other financial asset that may be settled for the entity’s equity instrument

Classification of Financial Assets on the Balance Sheet

Based on the major classification of a financial asset, we can have the following examples of financial asset:

Accounts receivableAccounts ReceivableAccounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance sheet.read more should be classified as loans and receivables if it is not held for trading. Further, the entity can classify it as at fair value through profit and loss or available for sale if they decide to do so. An investment in shares with a certain price and if it is not held for trading should be classified as an available-for-sale financial asset.

Debt security should be classified as loans and receivables if it is not quoted in an active market and is not held for trading.

Financial Assets Examples as per US GAAP

Generally, Accepted Accounting Principles format is followed in most US-based companies. Their pattern of representation, valuation, and impairment is different from other methods of reporting.

Financial Assets Examples US GAAP

source: Amazon.com SEC Filing

Following are some examples of financial assets under GAAP:

  • Hedging Instrument: A hedging instrument’s time value can be excluded from the effectiveness assessment.
  • Public Business Entities: It shall use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.

Financial Assets Examples as per IFRS

International Financial Reporting Standards format is majorly followed in most UK based companies. Their pattern of representation, valuation, and impairment is different from other methods of reporting.

Financial Assets Examples IFRS

source: Vodafone Annual Report

Based on the major classification of a financial asset, Following are some examples of financial assets under IFRS:

  • Compound Financial Instruments: Compound financial instruments are required to be split into a debt and equity component.
  • Equity investments: Equity investments are measured at FV-NI (changes in fair value are recognized in Net Income);

However, an irrevocable FV-OCI election is available for non-derivative equity investmentsEquity InvestmentsEquity investment is the amount pooled in by the investors in the shares of the companies listed on the stock exchange for trading. The shareholders make gain from such holdings in the form of returns or increase in stock value.read more that are not held for trading. FV-OCI means changes in fair value are recognized in Other Comprehensive IncomeOther Comprehensive IncomeOther comprehensive income refers to income, expenses, revenue, or loss not being realized while preparing the company's financial statements during an accounting period. Thus, it is excluded and shown after the net income.read more.

Recommended Articles

This article has been a guide to Financial Assets Examples. Here we discuss the classification of Financial Assets along with US GAAP & UK IFRS examples. You can learn more about financing from the following articles –

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