Financial Asset: A financial asset is any asset that is cash, an equity instrument of another entity, a contractual right to receive cash or another financial asset from another entity, or a contractual right to exchange financial instruments with another entity under conditions that are potentially favourable.
Financial Liability: A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another entity or to exchange financial instruments with another entity under conditions that are potentially unfavourable.
Equity Instrument: An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Recognition and Measurement
Financial instruments are recognised when the entity becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at their transaction price (including transaction costs, unless it is a financial instrument that is subsequently measured at fair value through profit or loss), unless the arrangement constitutes a financing transaction. Financing transactions are measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
Derecognition
A financial asset is derecognised when the contractual rights to the cash flows from the asset expire or are settled. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled, or expires.
Impairment of Financial Assets
At the end of each reporting period, financial assets not carried at fair value through profit or loss are assessed for indicators of impairment. If evidence of impairment exists, an impairment loss is recognised in the profit or loss.