A financial asset that do not derive value from an underlying asset or derivative contract. Non-derivative financial assets represent standalone financial assets (financial products or instruments) with intrinsic value that is derived from a monetary basis (monetary asset such as cash or cash equivalent– bank deposit) or contractual claim (securities: bonds and stocks). The contractual claim gives a holder the right to receive an amount of money (cash or otherwise) or another financial asset from another party or to exchange financial assets/ financial liabilities with another party under favorable conditions.
Other types of non-derivative financial assets include loans and receivables that by nature come with fixed or determinable payments (not quoted in an active market). These assets are typically created when an entity extends money, goods or services directly to a debtor with no intention of trading the receivable. This category also includes loans acquired as a participation in a loan from another lender. If the holder does not substantially recover all its initial investment (face value) from a financial asset, other than because of credit impairment, it does not classify it as a loan or receivable.
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