CIMA Management level F2 Advanced financial reporting
CIMA Management level F2 Advanced financial reporting: A Financial Instrument is the name given to any contract that gives rise to both a financial asset in one company and a financial liability or equity instrument in another entity.
A simple way to illustrate a financial instrument would be the example of sales of goods from one company to another – the sales contract entered gives rise to a financial asset in one company (the receivable this is classed under current assets on the SOFP), meanwhile the other entity would have a payable in their books for the corresponding receivable (classed under current liabilities on the SOFP)
This is a financial instrument.
CIMA Management level F2 Advanced financial reporting: Accounting Standards
There are three main accounting standards that should be remembered when approaching questions on finance instruments.
- IAS 32: Financial instrument; presentation
- IAS 39: Financial instrument; recognition and measurement
- IFRS 7: Financial instrument; disclosures.
The video below from BPP gives a good practical example and steps to follow when trying to understand what type of financial instrument we are talking about and how to recognise and measure it <—– key to ensuring you can tackle the questions that come up in the CIMA F2 objective test.
As mentioned in the above video, a useful tip is to remember the four step approach when defining what type of financial instrument we are talking about and how to measure it.
- Is it a financial asset “purchased” or is it a financial liability/equity “issued”
- Which category does it fall under?
- What’s the initial measurement?
- What’s the subsequent measurement?
Here is an overview of the different categories financial assets and liabilities can fall under and how the initial and subsequent measurement is impacted based on this.
CIMA Management level F2 Advanced financial reporting: Details on CIMA Operational level Marketing: History and Services
CIMA Management level F2 Advanced financial reporting : The Chartered Institute of Management Accountants (CIMA) is a UK based professional body offering training and qualification in management accountancy and related subjects. It is focused on accountants working in industry, and provides ongoing support and training for members.
CIMA is one of the professional associations for accountants in the UK and Ireland. Its particular emphasis is on developing the management accounting profession. CIMA is the largest management accounting body in the world with more than 227,000 members and students in 179 countries. CIMA is also a member of the International Federation of Accountants.
CIMA operates a standard scheme of qualifying examinations for prospective members. It promotes local education, training and management development operations, and new techniques through its research foundation and the dissemination of management accounting practices through publications and other media related activities. CIMA has been active in recent educational and vocational initiatives in former Eastern bloc countries. It publishes a monthly journal, supplied free to members and registered students, called ‘Financial Management’.
CIMA is recognised as a professional accounting body for various statutory purposes by UK and various overseas governments. The institute regulates the activities of its members by a code of practice, a discipline committee and (a recent innovation) a continuing education scheme. Its governing body is its council, comprising members elected from regional branches. Each of the branches has a committee and is responsible for much of the ‘grass roots’ activity. Activity such as qualification development is undertaken from the London head office.
The CIMA Global Business Challenge, an annual international business and strategic management competition for undergraduates around the world, is designed to bring out the best in the young business leaders of tomorrow.
In July 2009, CIMA added an online community – CIMAsphere – to its website. The community consisted of a range of blogs, discussion boards, groups, community answers, expert Q&A sessions and some social networking features for members, students and the general public. This has since been shut down. Members are instead encouraged to join the CIMA LinkedIn group, and students are directed to CIMAconnect, an online study support portal.
In 2011, CIMA entered into a joint venture with the American Institute of Certified Public Accountants (AICPA) to launch a global management accounting designation called the Chartered Global Management Accountant (CGMA).In the Americas outside the U.S., non-U.S. CPAs can obtain the new designation as an AICPA International Associate, after a rigorous assessment process. In the rest of the world, new designation holders are able to become members of CIMA after the same assessment process.
CIMA is proactive to tie up with American CPA because of the current convergence trend between US-GAAP and IFRS, reinforced following the merger of the iconic New York Stock Exchange with Germany’s Deutsche Boerse AG. “It remains to be seen whether companies listed in a combined exchange would be required to report under IFRS, US GAAP or both, but as the US appears to be moving towards IFRS adoption it is more likely the international standards would be the accounting rules of choice”.
CIMA Management level F2 Advanced financial reporting: Recommended read
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