As intangible assets that bring monetary value to a company, certain financial assets can be traded on the stock market.
Financial assets, whether investment securities or financial fixed assets, have their place in a company's financial accounting. However, their place in financial markets is more complex. Here is a precise definition of what these corporate securities and contracts represent.
Here is a comprehensive summary of everything you need to know about financial assets to better understand their role in the corporate and trading world.
By definition, a financial asset is a security or a contract that is negotiable and transferable held by a company. It can then bring a gain to its holder in exchange for a given risk. It is an intangible asset that acquires a monetary value. If the financial asset in question is held on a short-term basis, it is referred to as an investment security.
These include :
If, however, the financial asset is held on a long-term basis - i.e. for more than one year - it will be defined as a financial asset.
At this point, a distinction will be made between :
Thus, depending on whether the financial asset in question is held in the short or long term, its accounting treatment differs: marketable securities will be attached to class 26 and 27 accounts, whereas financial fixed assets will belong to class 50 accounts.
Note : to be recognized as such, the financial asset must be identifiable and measurable.
Financial assets are classified by level of liquidity (least liquid at the top, most liquid at the bottom) on the left-hand column of the company's balance sheet. The balance of the column will then represent the net book value of the financial assets.
Note: the adjacent column indicates whether any impairment has occurred for each of the financial assets listed.
The value of a financial asset is determined by adding the purchase cost of the securities to their acquisition costs. This calculation gives the acquisition cost of the asset - if it was indeed purchased.
Acquisition costs include :
Attention : tax rules make it illegal to immediately deduct the acquisition costs of equity securities.
Financial assets are transferable and negotiable and are therefore in circulation on the financial markets.
Shares, but also bonds and warrants are all financial assets that you can invest in.
Good to know : cryptocurrencies, receivables and negotiable debt securities are also financial assets.
Conversely, financial derivatives such as swaps, futures, forwards and options are recorded off the company's balance sheet: as such, they are not financial assets, even though they account for the bulk of trading on the financial markets. Because they partly reflect the financial health of a company, financial assets are used as a basis for financial analysis in trading. In addition to the possibility of gain - linked to an inherent risk - that a financial asset offers to its holder, other rights can be granted.
Thus, one share will offer the shareholder
Please note : it is important to distinguish between a company's financial assets - which are therefore different from its liabilities - and its trading assets!
The concept of an asset in trading is much broader than that of a "financial asset" issued by a company: an asset can therefore be both tangible and intangible as long as it is capable of producing monetary value for its holder. So-called "underlying assets" can, for example, be the underlying of a stock, an index or a commodity; in this case, the investor does not own the asset directly, but speculates on the rise or fall of its stock price.
Financial assets are divided into investment securities and financial fixed assets, therefore subject to two different accounting systems. As they are transferable and negotiable, they are part of the financial markets. However, it is essential to distinguish them from “assets” as it is used in trading... A broader notion since it includes any asset likely to produce a profit!