a Definitions and Terminology

(Based on FRS 25, see below)

Financial instrument: A financial instrument is any contract that gives rise to both a financial of one entity and financial liability or equity instrument of another entity.

Financial instruments include both:

• primary instruments such as receivables, payables and equity securities

• derivative financial instruments such as forward exchange contracts interest rate swaps.

Commitments to buy or sell non-financial items are outside the definition, financial instruments.

Financial assets: A financial asset is any asset that is:

• cash;

• an equity instrument of another entity;

• a contractual right to receive cash or another financial asset from another entity;

• a contractual right to exchange financial instruments with another entity under conditions that are potentially favourable to the entity.

The term does not cover: physical assets (e.g. inventories, property, plant, equipment, leased assets); intangible assets; prepaid expenses.

Financial liabilities: A financial liability is any liability that is a contractual obligation:

• to deliver cash or another financial asset to another entity;

• to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity.

The term does not cover deferred revenue or warranty obligations because the probable outflow of economic benefits associated with these is the delivery of goods or services, rather than an obligation to pay cash or another financial asset.

Derivatives: A derivative is defined in International Accounting Standard 39 as a financial instrument or other contract with all three