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IAS 32 'Financial Instruments: Disclosure and Presentation' states that the purpose of the disclosures required by this standard is to provide information that will enhance...

      

IAS 32 'Financial Instruments: Disclosure and Presentation' states that the purpose of the disclosures required by this standard is to provide information that will enhance understanding of the significance of on-balance-sheet and off-balance-sheet financial instruments to an enterprise’s financial position, performance and cash flow and assist in assessing the amounts, timing and certainty of future cash flows associated with those instruments. State and briefly describe three types of financial risks described in the standard, in relation to transactions in financial instruments.

  

Answers


Martin
Price risk. There are three types of price risk. Namely:- currency risk, interest risk and market risk.

- Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

- Interest risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.

- Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices whether those changes are caused by factors specific to the individual security or its issuer or factors affecting all securities traded in the market.
Credit risk: The risk that is partly to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.

Liquidity risk (or funding risk): The risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments.

Cash flow risk: The risk that future cash flows associated with a monetary financial instrument will fluctuate in amount.
marto answered the question on February 14, 2019 at 06:16


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