FINANCIAL ASSET

PREPARED BY:
ABRIL MARINEL
GIGANTE SANDRA KAYE
 LEARNING OBJECTIVES

1 Define financial asset and give 2 Account for cash and cash
examples equivalents

3 Account for receivables Account for investments

4
Financial instrument
 is any contract that gives rise to
both a financial asset of one entity
and a financial liability of another
entity.
 Financial asset
 cash
 An equity instrument of another entity
 contractual right to receive cash
 contractual right to exchange financial instrument
 contract that will or may be settled in the entity's own
instrument.
Financial liability
 contractual obligation to deliver cash
 contractual obligation to exchange financial asset
 contract that will or may be settled in the entity's
own equity instrument
FINANCIAL ASSET

Initial Recognition
 recognized when an entity becomes a party to the
contractual provisions of the instrument.

Initial Measurement
 @ fair value plus transaction cost.
 FINANCIAL ASSET

Cash and Cash Investments

Equivalents

Receivables Derivatives
 CASH

Cash On Hand Cash In Bank Cash Treasury Account

Petty Cash Fund (PCF)
 refers to the amount granted to duly designated petty cash fund
custodian for payment of authorized petty or miscellenous expenses
which cannot be conviniently paid through checks or ADA.
CASH EQUIVALENTS
• are short-term, highly liquid investments that are readily convertible
to known amounts of cash and which are subject to an insignificant
risk of changes in value.
Unreleased commercial Dishonored Checks
checkst

Cancelled Checks Cash Shortage/Overage

BANK RECONCILIATION

 Is the report that is prepared for the purpose of bringing the balances
of cash per records and per bank statement into agreement.
BANK STATEMENT

 Is a report issued by a bank which shows the credits and debits to the
depositor's account during a period, as well as the account's
cumulative balance.
Receivables
 represents claims or cash or other assets from other entities.

 Accounts Receivable  Loans Receivable

 Notes Receivable  Other receivables

Receivables

Initial Measurement
 @ fair value plus transaction cost

Subsequent Measurement
 @ amortized cost
Investments
Type of Financial Asset Initial Measurement Subsequent Measurement

Fair value; changes in fair

a. Financial asset @ FV
Fair value value are recognized in
through surplus and deficit
surplus/deficit

Fair value plus transaction Amortized cost

b. Held-to-maturity
costs (effective interest method)
 Illustration: If the investment is classified as Financial Asset Held for Trading
Initial Measurement: Entity A acquires an investment for P100 000. Transaction
costs amount to 10 000.
Subsequent Measurement: The fair value at the end of the period is P120 000.

Initial Measurement Subsequent Measurement

Financial Assets Held for Trading P100,000 Financial Assets Held for Trading P20,000
Other Financial Charges 10,000 Gain from Changes in FV P20,000
CIB – Local Currency, BSP P110,000
 Illustration: If the investment is classified as Held-to-maturity
On January 1, 20X1, Entity A acquires 5-year, 5%, P1 000 000 face amount bonds
for P957 876 and classifies them as held-to-maturity investments. The issuer
pays annual interest every December 31. The effective interest rate is 6%.

January 1 December 31

Investment in Bonds P957,876 CIB – Local Currency, BSP P50,000

CIB – Local Currency, BSP P957,876 Investment in Bonds 7,437
Interest Income P57,473
Derecognition of Financial Assets
 the process of removing a previously recognized asset, liability or equity
from the statement of financial position.

 contractual rights to the cash flows from the financial asset expire or are
waived

 the financial asset is transferred and the transfer qualifies for

derecognition
 Illustration: Impairment and Derecognition
Entity A, a government hospital, receives promissory notes from several patients
amounting P1 000 000. At year-end, it was estimated that P300 000 notes are
impaired.
A subsequent audit reveals that P100 000 of the impaired notes cannot be
collected anymore. The COA authorizes the derecognition of these notes.

Impairment Derecogntion

Impairment Loss-Loans and Allowance for Impairment

Receivables P300,000 Notes Receivable P100,000
Allowance for Impairment Notes Receivable P100,000
Notes Receivable P300,000