Glossary:Financial assets and liabilities
Financial assets are economic assets, comprising all financial claims, equity and the gold bullion component of monetary gold. These assets are stores of value representing a benefit or series of benefits accruing to the economic owner through holding or using the assets over a period of time. They are a means of carrying forward value from one accounting period to another. By contrast, financial liabilities are established when debtors are obliged to provide a payment or a series of payments to creditors.
The classification of financial assets and liabilities corresponds to the classification of financial transactions. Financial assets and liabilities as negotiable financial instruments are valued at market value; these values should exclude commissions, fees and taxes. Financial instruments that are non-negotiable are valued at nominal value. These assets/liabilities include:
- Monetary gold and special drawing rights (SDRs): the former is gold bullion held by financial authorities (or others subject to effective control by such authorities) as a reserve asset against which no outstanding financial liability exists; the latter is an international reserve asset created by the International Monetary Fund (IMF).
- Currency and deposits: the former is composed of banknotes and coins issued by monetary authorities; the latter are exchangeable for currency on demand and may be used directly for making payments by cheque, giro, direct debit, and so on.
- Debt securities: negotiable financial instruments (legal ownership of which may be transferred) that must be designed for potential trading on an organised exchange or in the over-the-counter market.
- Loans: financial assets created when creditors lend funds to debtors, either directly or through brokers, which are either evidenced by non-negotiable documents or not evidenced by documents.
- Equity and investment fund shares or units: composed of financial assets that represent property rights on corporations or quasi-corporations (such assets generally entitle the holders to a share of profit, and to a share of net assets in the event of liquidation).
- Insurance, pension and standardised guarantee schemes: composed of financial assets of policy holders or beneficiaries and financial liabilities of insurers, pension funds, or issuers of standardised guarantees.
- Financial derivatives and employee stock options: financial assets linked to a financial asset, a non-financial asset or an index, through which specific financial risks can be traded in financial markets in their own right (for example, options, forwards and credit derivatives, or agreements for the purchase of an employer’s stock at a stated price).
- Other accounts receivable/payable: financial assets that are created as a counterpart of a financial or a non-financial transaction in cases where there is a timing difference between this transaction and the corresponding payment (for example, the direct extension of credit by suppliers, advances for work that is in progress or has yet to be undertaken, or prepayment for goods/services that have yet to be delivered).