Funny Figures presents a nerdy adventure through Finance
Ever felt like accounting is just a super serious adult game of Monopoly? Well, buckle up! Today, we’ll uncover what makes financial instruments the shiny tokens in this real-life game board. And trust me, it’s more fun than it sounds!
🎻 Strings Attached: What is a Financial Instrument?
Picture this: a financial instrument is like a contract, except instead of getting Aunt Edna’s antique vase, you’re getting something that either increases or decreases your stash of cash. These instruments have financial obligations tied to them, and include the likes of stocks, bonds, loans, and derivatives.
They’re essentially the Swiss Army Knife of finance—multi-functional and incredibly handy if you know what all the blades do (just avoid the rusty ones!).
🍕 Slice It: The Big Two
It’s time to make a crucial distinction: basic financial instruments and those that would give Einstein a headache (spoiler alert: derivatives).
Basic Financial Instruments include:
- Stocks: Shares in a company. Think of them like owning a slice of pizza!
- Bonds: Loans made to large organizations. Imagine being the friend who lends lunch money, but with a more formal IOU!
- Loans: Borrowed money with an obligation to pay back. Like taking a trip to Loan Shark Larry for some quick cash.
Complex Financial Instruments cover:
- Derivatives: Financial contracts whose value derives from an underlying asset. Imagine betting on a horse race where the horses are actual stocks!
- Hedging Instruments: Tools used to minimize risk. Picture them as financial umbrellas for those rainy days in the market.
🕵️ Clifford Standards: The Accounting Rules
Financial instruments aren’t just exciting on their own—they come with their own rulebooks! In the UK and Republic of Ireland, they follow the stringent Sections 11 and 12 of the Financial Reporting Standard. Internationally, our financial adventures are guided by IAS 39 and IFRS 9.
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title Financial Instruments Distribution
