Nur Izzaty Nabihah

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FAR 430 PROJECT
FINANCIAL INSTRUMENTS

SUBMIT BY:
NUR ‘IZZATY NABIHAH BT ABU BAKAR
2012211236
PREPARED FOR :
DR. HALIL PAINO

TABLE OF CONTENTS
NO

DETAILS

PAGES

1.

Acknowledgement

3

2

Introduction

4

3.

Financial instruments, financial assets, financial liability, equity

5

instruments, primary instruments and derivatives
4.

Classification and presentation of financial instruments into financial

8

assets, liability and equity instruments
5.

Treatment of compound instruments

11

6.

Disclosure of treasury shares

13

7.

Accounting treatment of interest, dividend, losses and gains

14

8.

Offset fianancial assets and financial liability.

16

9.

The risks associated with financial instruments

18

10.

Disclosure requirements of frs132 financial instruments

21

11.

References

23

2

ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to ALLAH for giving me a good health and mind until I can completely finish my Financial Instruments report.
Besides that, I would like to express deepest appreciation to my lecturer PROFESSOR DR. HALIL BIN PAINO for his exemplary guidance, monitoring and constant encouragement throughout the FAR 430 subject. The blessing, help and guidance given by him time to time shall carry me a long way in the journey of life on which I am about to embark. In addition, because of this report, I have the opportunities to know about the topic of Financial Instruments.

Lastly, we thank our parents, mentor and friends for their constant encouragement without which this assignment would not be possible. Thank You.

3

INTRODUCTION

The term ‘Financial Instruments’ is covers a wide range of instruments that includes assets, liabilities, and an equity in the Financial Statement Report. MFRS 132 and the standard defines Financial Instruments:Presentation as a contract that gives a rise to a financial asset of an entity and a financial liability or equity instrument of another entity. Included in the Financial Instruments are primary financial instrument like payables, receivables, loans and advances, debentures and bonds and also derivative instruments like an options, futures, swaps, caps, collars and so on.

Even though there is a contractual right or obligation, the substances of the transaction may not same as the legal form, but substance over-rides form. There can be a number of financial instruments that may substance be different from what they are appear to be. In addition, there can be instruments that were previously left out from the financial position which must to be recognized and accounted such as derivatives. It also can be a instruments that are now treated differently. Derivatives were not be recognized previously but will disclosed in the financial statements. A derivative with positive value classify as financial assets while if the value is negative its classify as financial liability. Some financial instruments are treated differently, such as redeemable preferences shares or convertibles.

MFRS 132 objective is to establish the principles for presenting financial instruments and set off financial assets and financial liabilities from the perspective of the issuer.

4

1. Define financial instruments, financial assets, financial liability, equity instruments, primary instruments and derivatives.

Definition of a financial instrument also encompasses a contract that gives rise to a non-financial asset or non-financial liability in addition to a financial asset or financial liability. Financial instruments often give a one party an option to exchange a financial asset for a non-financial asset. This financial instrument include are primary financial instrument like payables, receivables, loans and advances, debentures and bonds and also derivative instruments like an options, futures, swaps, caps, collars and so on.

MFRS 132 states...
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