Page 59 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Financial instruments

1.3 Financial asset or financial liability?

In an exam scenario, it is important that you can spot the difference
between the types of instrument. The wording of the scenario is
crucial in order to accurately determine the type of instrument
involved.

Action Examples Providing or Instrument
obtaining
finance?

BUYS  Company buys a 5% Providing Asset
bonds/debentures debenture for £1m

BUYS  Company buys 1m $1 Providing Asset
shares shares at $1.5

ISSUES  Company issues a 5% Obtaining Liability
bond/debenture debenture for £1m

ISSUES  Company issues 1m Obtaining Equity
shares $1 shares at $1.5

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