Financial instruments are cash, evidence of an ownership interest in an entity, or a contractual right to receive, or deliver, cash or another financial instrument.
Financial instruments can be categorized by form depending on whether they are cash instruments or derivative instruments:
* Cash instruments are financial instruments whose value is determined directly by markets. They can be divided into securities, which are readily transferable, and other "cash" instruments such as
loansand deposits, where both borrower and lender have to agree on a transfer.
* Derivative instruments are financial instruments which derive their value from the value and characteristics of one or more underlying assets. They can be divided into exchange-traded derivatives and over-the-counter (OTC) derivatives.
Alternatively, financial instruments can be categorized by "asset class" depending on whether they are equity based (reflecting
ownershipof the issuing entity) or debt based (reflecting a loan the investor has made to the issuing entity). If it is debt, it can be further categorised into short term (less than one year) or long term. Foreign Exchange instrumentsand transactions are neither debt nor equity based and belong in their own category.
Combining the above methods for categorization, the main instruments can be organized into a matrix as follows:
Some instruments defy categorization into the above matrix, for example
Measuring Financial Instrument's Gain or Loss
The table below shows how to measure a financial instrument's gain or loss:
* [http://www.ifrslist.com/ IFRS List - The online community about IFRS/IAS and Auditing]
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