Financial Instruments

2458 Words Jul 31st, 2012 10 Pages
INTRODUCTION - FINANCIAL INSTRUMENTS
In today’s world of Globalization, we are witnessing free trade agreements between different countries, international exchanges are multiplying, and commercial barriers are falling. Hence competition is measured on global scale. In this wave of globalization, financial instruments have been growing at an incredible pace. We are currently witnessing a rapid expansion phenomenon of the use of the financial instruments in the international financial market. These fluctuate from the traditional instruments like interests or bonds, to the various forms of derivative instruments, such as futures contracts, forward contracts, options, interest rate swap etc. So the need for converging standards for addressing
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Reliability is achieved through representational faithfulness, verifiability and neutrality. Also as per CICA Handbook section 1000, Para .171 Information is relevant by its nature when it can influence the decisions of users by helping them evaluate the financial impact of past, present or future transactions and events or confirm, or correct, previous evaluations. Relevance is achieved through information that has predictive value or feedback value and by its timeliness.
Over the past decade, accounting standards for the valuation of financial instruments have evolved to better reflect the economic reality facing publicly accountable companies. The important change is valuing financial assets and liabilities at fair value. Fair value is defined as per the price agreed upon by knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction. With reference to the CICA Handbook section 1000 Para .521 financial statements are prepared with presumption that an entity is a going concern without any intention or need to liquidate, to materially curtail the scale of its operations. The CICA considers a financial instrument to be traded in an active market when quoted prices that reflect recent and regularly occurring transactions are readily and regularly available. There are also different techniques available with accountant if market
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