Example of financial asset

 Cash and Cash equivalents

 Receivables
 Investments in equity and debt securities
 Derivative assets

 A financial asset is recognized when an entity becomes a party to

the contractual provisions of the instrument. (PPSAS 29.16)
 Financial assets are initially measured at fair value plus
transaction costs, except for financial assets at fair value through
surplus or deficit whose transaction costs are expensed.

 Transaction costs are incremental costs that are directly

attributable to the acquisition, issue, or disposal of a financial
instrument. 

 . Cash – comprises cash on hand, cash in bank and cash treasury

accounts.

 The Petty Cash Fund of a government entity is:

o maintained using the imprest system.
o sufficient to defray recurring petty expenses for 1 month.
o used for disbursements not exceeding ₱15,000 per
transaction.
 o replenished as soon as disbursements reach at least 75% or
as needed.

 A government entity prepares monthly bank reconciliations

for each of the bank accounts it maintains, using the adjusted
balance method.   
 Only debt instruments acquired within 3 months before their
scheduled maturity date can qualify as cash equivalents. 
 Receivables are initially measured at fair value plus transaction
costs and subsequently measured at amortized cost.
  A derivative is a financial instrument or other contract that
derives its value from the changes in value of some other
underlying asset or other instrument. 
 Characteristics of a derivative:
1. Its value changes in response to the change in an underlying;
2. It requires no initial net investment (or only a very minimal
initial net investment); and
3. It is settled at a future date. 
PURPOSE OF DERIVATIVES
 The very purpose of derivatives is risk management.
 Risk management is the process of identifying the desired level of
risk, identifying the actual level of risk and altering the latter to
equal the former.