Lecture 01: Financial Asset. [Investment Accounting]

Defines a financial instrument as a contract between at least two parties that creates a financial asset for one entity and a financial liability or equity instrument for another.

Explains that financial assets include cash, contractual rights to receive cash/assets, rights to exchange assets under favorable conditions, and equity instruments of other entities.

Clarifies that physical/intangible assets (like machinery or patents), leased assets, inventories, and prepaid expenses are typically not financial assets because they lack a direct contractual cash-settlement obligation.

Describes financial liabilities as contractual obligations to deliver cash or financial assets, distinguishing them from constructive obligations like tax payables or promotional rewards.

Explains equity as a residual interest in an entity's assets after deducting liabilities, typically represented by ordinary or preference shares, while noting that mandatory redeemable preference shares are treated as liabilities.

Introduces the three measurement categories for financial assets: Fair Value through Profit or Loss, Fair Value through Other Comprehensive Income, and Amortized Cost, based on the entity's business model for holding the investment.