Know Your Rights!!

How-to distinguish source of funds as a   Debt or Equity? Let’s begin reading this article by knowing the definition of Financial Instruments. A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. The essence of the definition lies in contract which we generally understand as a transaction having all the three characteristics: agreement between two or more parties; for an economic consideration and legally enforceable. The definition then highlights financial assets, financial liabilities and equity instrument. Assets, liabilities, equity instrument reminds us of the balance sheet. For example, in credit sales transaction, the entity which sold the goods has a financial asset – trade receivable – while the purchaser has to account for a financial liability – trade payable. Another example is when the entity sources finance by issuing ordinary equity shares. The e...

How-to- Determine Operating Segments tell the full story of an Entity OVERVIEW Just a compliance activity is what Segment reporting is understood by the financial reporting teams across geographies. This undermines its importance and hence is at most times overlooked by the senior management and audit committees. In this article, I plan to take you through a short journey to the key requirements of ‘Operating Segments’ – IFRS 8. The entire article will keep its focus on How-to discern the importance of segment reporting in narrating the full story of an entity. WHY IFRS 8 is IMPORTANT? When an entity becomes large, it becomes important to understand how they operate. Almost all information contained in consolidated financial statements is focused on providing users with the financial position and performance of the entity as a whole. This information is useful but it seldom tells the full story. How do we know? When we read an earnings guidance by a large entity we get...