FIN3109 Lecture Notes - Lecture 2: Accounts Payable, Commercial Paper, Savings Account
FIN3109 – Module Two
- Statement of Financial Position s another name for the balance sheet. It is
one of the main financial statements and it reports an entity's assets,
liabilities, and the difference in their totals.
- Asset Account
oAssets include cash, liquid assets and due from other financial institutions: notes and
coin, deposits with RBA, repos etc.
oTrading and investment securities: fixed interest securities – mainly government and
semi-governments, and some corporate debt.
Trading securities are mainly short term, e.g. Treasury notes (13-26 weeks),
commercial paper. Measurement of market risk for capital adequacy takes
account of the interest sensitivity of these securities
Investment securities are mainly longer term, e.g. Treasury, semi-
government, corporate and euro bonds. (Maturities > 1 year)
oLoans, advances and other receivables: commercial loans, consumer loans, housing
loans, other loans, leases – less provision for doubtful debts
oFixed assets: non earning assets such as a buildings, equipment
oAll other assets: Compilation of other less significant assets
-Liabilities and Shareholders’ Equity
oDeposits and other borrowings
oMoney market borrowings; short term – 24hr to 1 year, 24 hour borrowing would be
mainly in the interbank market, repos where bank will sell securities and repurchase
+ corporate bonds issued by the ADI both convertible and non-convertible
oCurrent accounts: private/business/government cheque accounts. 2/3 interest bearing,
1/3 non-interest bearing
oSavings accounts: interest bearing. No specified maturity
oInvestment savings accounts: Higher interest but extra conditions: minimum balance,
minimum withdrawal, notice periods for withdrawal
oTerm deposits: Fixed deposits up to about 8 years. Some penalties for early
withdrawal. Held by individuals, businesses, governments, other banks, and other
financial institutions.
oCertificates of deposit: fixed interest – negotiable: in $1 million bundles, 7 day to 3
months typically – can be sold in the open market; non-negotiable: smaller amounts
than $1 million – buy and hold investment
oDebt Issues: publicly traded debt securities. E.g. Commercial paper issued in the US;
Bonds and commercial paper issued in overseas currency
oBills payable, provisions and other liabilities: dividends payable, accounts payable
oLoan Capital; Subordinated bonds, notes, debentures, perpetual notes > 1 year
maturity. May be part of Tier II capital under certain conditions. Likely equity,
claims by holders of this capital are subordinated to other claimants such as
depositors etc.
oShareholder’s equity: Book value of assets – book value of liabilities. Includes:
ordinary and preference shares, retained profits and equity reserves.
-Interest Income and Expense
oInterest Revenue: Loans, Trading and investment securities
oInterest Expense: Paid on deposit, debt issues, other loan capital etc..
-Other Income, Expense and Profits
oOther operating revenue: Account fees, loan fees, commissions for specialised
services/advice (managed funds, letters of credit etc.), net gains from sale of
securities
find more resources at oneclass.com
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Document Summary
Statement of financial position s another name for the balance sheet. It is one of the main financial statements and it reports an entity"s assets, liabilities, and the difference in their totals. Asset account: assets include cash, liquid assets and due from other financial institutions: notes and coin, deposits with rba, repos etc, trading and investment securities: fixed interest securities mainly government and semi-governments, and some corporate debt. Trading securities are mainly short term, e. g. treasury notes (13-26 weeks), commercial paper. Measurement of market risk for capital adequacy takes account of the interest sensitivity of these securities. Liabilities and shareholders" equity: deposits and other borrowings, money market borrowings; short term 24hr to 1 year, 24 hour borrowing would be mainly in the interbank market, repos where bank will sell securities and repurchase. + corporate bonds issued by the adi both convertible and non-convertible: current accounts: private/business/government cheque accounts. 1/3 non-interest bearing: savings accounts: interest bearing.
