Financial

Instruments
Topic 2
Dr. Ralph Benjie M. Austral
 RECAP
What Is Keynesian
Economics?
 RECAP
What is a Commercial
bank?
 RECAP
What is the difference with a
Commercial Bank and a Thrift
Bank?
What are government bonds?
What are government bonds?
Government bonds are like IOUs (I owe yous) from the
government.

When you buy a bond, it’s like you are lending money to the
government, and in return, the government promises to pay
you back later—with interest.
What are government bonds?
It’s safer than many other investments.
What are government bonds?
It earns interest (more than regular savings).
What are government bonds?
It helps the government fund projects like roads, schools, or
hospitals.
Where can I buy government bonds
Most government bonds are sold through partner banks,
including:
• Land Bank of the Philippines
• Development Bank of the Philippines (DBP)
• BDO, Metrobank, BPI, RCBC, and other major commercial
banks
Where can I buy government bonds
Bureau of the Treasury Online Channels
• TreasuryDirect – for digital bond purchases (limited
availability).
What is GBonds?
GBonds is a mobile feature on the GCash e‑wallet app that
allows users to buy and sell government securities, including
Treasury bills and Retail Treasury Bonds (RTBs)

GBonds Minimum Investment

• For Treasury Bills (T-Bills): minimum investment can be as
low as ₱500.
• For Retail Treasury Bonds (RTBs): minimum investment
usually starts at ₱5,000.
Lower Minimum Investment
• GBonds lets you start investing with as little as
₱500 for Treasury Bills and ₱5,000 for Retail
Treasury Bonds, making it easier for everyday
Filipinos to participate.
• Traditional bonds often require higher minimum
amounts.
Convenience and Accessibility
• You can buy and sell GBonds directly through the GCash
mobile app anytime, anywhere—no need to visit banks or
government offices.
• Traditional bonds usually require going to banks or using
official platforms that might be less user-friendly.
Faster Transactions
• GBonds transactions are near real-time or
instant, enabling quick investing or
redemption.
• Traditional bond purchases and sales can take
days to process.
Financial Inclusion
• GBonds opens up government bond investing to
unbanked and tech-savvy Filipinos, democratizing
access to safe investments.
• Traditional bonds mainly attract seasoned or
institutional investors with more resources.
 "An investment in
knowledge pays the best
interest.“

— Benjamin Franklin
The Different Types of
Financial Instruments
What is a Financial
Instrument?
 What is a Financial
Instrument?
A financial instrument is any contract that gives rise
to a financial asset of one entity and a financial
liability or equity instrument of another entity.

IAS 32 – Financial Instruments

 What is a Financial
Instrument?
A financial instrument is any contract that gives rise
to a financial asset of one entity and a financial
liability or equity instrument of another entity.

1. Financial assets
2. Financial liabilities
3. Equity instruments
4. Derivative Financial
Instruments
Financial assets
Financial assets
Financial assets are intangible and liquid asset that gets its
value from a contractual right or ownership claim.

A financial asset is any asset that is:

(a) Cash
(b) An equity instrument of another entity
(c) A contractual right to:
• receive cash or another financial asset
from another entity; or
• exchange financial assets or liabilities
with another entity under potentially
favorable conditions
(d) A contract that will or may be settled in
the entity’s own equity instruments, in certain
specified ways

IAS 32, paragraph 11

Financial assets
Financial assets are intangible and liquid asset that gets its
value from a contractual right or ownership claim.

CASH
Financial assets
Financial assets are intangible and liquid asset that gets its
value from a contractual right or ownership claim.

RECEIVABLES
Financial assets
Financial assets are intangible and liquid asset that gets its
value from a contractual right or ownership claim.

Equity Instruments of
another Entity
Financial Liabilities
Financial Liabilities
A financial liability is any liability that is:
(a) A contractual obligation to deliver cash or another
financial asset to another entity; or
(b) A contract that may be settled in the entity’s own
equity instruments and is not classified as an equity
instrument.”
— IAS 32 – Financial Instruments
Financial Liabilities
A financial liability is any liability that is:
(a) A contractual obligation to deliver cash or another
financial asset to another entity; or
(b) A contract that may be settled in the entity’s own
equity instruments and is not classified as an equity
instrument.”
— IAS 32 – Financial Instruments

Trade and Bank

Payables
Financial Liabilities
A financial liability is any liability that is:
(a) A contractual obligation to deliver cash or another
financial asset to another entity; or
(b) A contract that may be settled in the entity’s own
equity instruments and is not classified as an equity
instrument.”
— IAS 32 – Financial Instruments

Share-based
payment settled in
cash
 Financial Liabilities
A financial liability is any liability that is:
(a) A contractual obligation to deliver cash or another
financial asset to another entity; or
(b) A contract that may be settled in the entity’s own
equity instruments and is not classified as an equity
instrument.”
— IAS 32 – Financial Instruments

Share-based
payment settled in
cash
Example : You can either get ₱1 million in cash OR shares of our
company—your choice.
 Financial Liabilities
A financial liability is any liability that is:
(a) A contractual obligation to deliver cash or another
financial asset to another entity; or
(b) A contract that may be settled in the entity’s own
equity instruments and is not classified as an equity
instrument.”
— IAS 32 – Financial Instruments

Share-based
payment settled in
cash
Example : You can either get ₱1 million in cash OR shares of our
company—your choice.
That’s not counted as “equity” (ownership) because:
• The investor can choose cash, so the company owes something → it’s a financial liability.
• The company doesn’t control how it will settle the deal.
Equity Instruments
Equity Instruments
“An equity instrument is any contract
that evidences a residual interest in
the assets of an entity after
deducting all of its liabilities.”
— IAS 32, paragraph 11
Equity Instruments
“An equity instrument is any contract
that evidences a residual interest in
the assets of an entity after
deducting all of its liabilities.”
— IAS 32, paragraph 11
Ordinary Shares
Preferred Shares
Equity Instruments
“An equity instrument is any contract
that evidences a residual interest in
the assets of an entity after
deducting all of its liabilities.”
— IAS 32, paragraph 11
What is the difference between
Ordinary Shares and Preferred
Shares?
Equity Instruments
“An equity instrument is any contract
that evidences a residual interest in
the assets of an entity after
deducting all of its liabilities.”
— IAS 32, paragraph 11
What is the difference between
Ordinary Shares and Preferred
Shares?
**Payment of dividends, PS are paid before
ordinary shareholders
Derivative
According to IFRS 9 – Financial Instruments, a
derivative is defined as:

“A financial instrument or other contract within the

scope of IFRS 9 with all three of the following
characteristics:”

1. Its value changes in response to changes in a

specified variable (e.g., interest rate, foreign
exchange rate, commodity price, stock price,
index, etc.)

2. It requires little or no initial net investment, or

one that is smaller than would be required for
other types of contracts.

3. It is settled at a future date

 Derivative
Derivative What It Is Think of It Like...

Private agreement to
A handshake deal for
Forward Contract buy/sell in future at
a future transaction
set price
Standardized version A legally-binding
Futures Contract of a forward, traded deal on a
on an exchange marketplace
Right to buy at set Paying to reserve
Call Option price within time something at today’s
limit price
Locking exchange Booking dollars
Currency Futures rate for future today for a future
currency transaction remittance
Exchanging interest Swapping your
Interest Rate
types (fixed vs. loan’s interest plan
Swaps
variable) with someone else
The Different Types of
Financial Instruments
 "An investment in
knowledge pays the best
interest.“

— Benjamin Franklin