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Monetary Assets

What are Non-Monetary Assets?

  • Prepayments or advance payments can either be monetary or non-monetary, based on a contract with a third party (the party to which payment was made).

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  • If as per the contract, the pre-paid amount is non-refundable (which usually is) or if there is no contract and the probability of getting the amount back is very low, then it should be treated as a non-monetary asset.

  • Investments in preference shares shall be treated as monetary assets if there is a clause in the contract, by virtue of which, the redemption of preference shares has to be undertaken by the issuing entity after a certain time in the future. Otherwise, investments in preference shares will be treated as assets that are non-monetary.

Assets that can either be Monetary or Non-Monetary

  • Conversely speaking, non-monetary assets are those that do not have a value determinable in exact dollar terms. The value assets that are non-monetary change or fluctuate a lot over time and its cash convertibility is limited.

  • Therefore, these assets are not that liquid. Examples include property, plant & equipment, intangible assets (including goodwill), equity shares (some companies treat shares issued in foreign currency as monetary assets due to the absence of clear-cut directives), and Inventories.

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  • A non-monetary asset like plant & machinery can see its value decline as the technology becomes obsolete. Its value depends upon certain factors such as changes in technology, supply-demand factors, etc. These factors are not relevant when it comes to the valuation of monetary assets.

Characteristics of Monetary Assets

Two key characteristics of these assets include:

  1. Change in real terms: Monetary assets are fixed in their dollar terms but are subject to changes in real terms, i.e., a relative change in buying power. For example, a sum of $100 can only buy you 2 dozens of apples now, compared to 3 dozens previously. This means that there has been a decline in real terms amounting to 33%, even though the dollar amount remains the same.

  1. Restatements in financial statements: They are not subject to a restatement of their recorded value in financial statements. In contrast, a non-monetary asset like land may be subject to depreciation or appreciation, depending upon market conditions.

 

Although, if the original figures are in units of foreign currency, then the value of these assets has to be stated according to the prevailing exchange rate on the closing date.

IAS 21 clearly states on the point:

  • Monetary assets are recorded using the closing exchange rate.

  • Non-monetary assets are not re-translated but kept at the historical or original rate.

Dissecting the term “Monetary Assets”

Monetary assets are assets whose values do not fluctuate in dollar terms and that carry an obligation to deliver a certain amount of currency units. In short, they are static. However, their purchasing power may change upon a change in the prices of goods and services in general. A monetary asset cannot become obsolete or gain more value (appreciate) in the market over time.

Assets that can either be Monetary or Non-Monetary

Prepayments or advance payments can either be monetary or non-monetary, based on a contract with a third party (the party to which payment was made). If as per the contract, the pre-paid amount is non-refundable (which it usually is) or if there is no contract and the probability of getting the amount back is very low, then it should be treated as a non-monetary asset.

Investments in preference shares shall be treated as monetary assets if there is a clause in the contract, by virtue of which, the redemption of preference shares has to be undertaken by the issuing entity after a certain time in the future. Otherwise, investments in preference shares will be treated as assets that are non-monetary.

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Frequently asked questions

Consumer Retail


Consumer Retail Group advises its clients on a wide spectrum of transactions, including mergers & acquisitions, equity and debt offerings, derivatives and structured products, risk management, etc. We cover such industries as apparel, food and beverages, pet food and services, beauty and personal care products, restaurants, specialty and hardline retailers, department stores and supermarkets. We cover clients in the Americas, Europe and Asia Pacific. We work with clients of all sizes, which include corporations, families and founders, financial sponsors and other financial investors.




Financial Institutions


Our Financial Institutions group provides financing and advisory services to institutions worldwide, including banks, insurance companies, asset management firms, financial technology companies and specialty finance institutions. With nearly 9000 employees across the globe—and an expanding footprint in growth markets such as Latin America, Central Europe and China—our specialists offer a wide suite of products, including M&A advisory, equity and debt financing, structured finance and risk management/hedging.




Financial and Strategic Investors


The Financial and Strategic Investors Group provides advisory and investment banking services to a broad range of institutions including private equity firms, pension funds, sovereign wealth funds, family offices and other investors. We assist our clients during the entire lifecycle of their investments starting with idea generation, acquisition advisory and financing, through to the final sale or public market stock offering(s).




Healthcare


The Healthcare group provides advice and services across a wide range of sub-sectors, including: Biotechnology, Diagnostics / Life Sciences, Healthcare Information Technology, Healthcare Services, Medical Devices, and Pharmaceuticals. With experts in offices around the world, our team assists clients with a variety of transactions, including mergers and acquisitions, divestitures, initial public offerings and other equity offerings, debt underwriting, and risk management.




Industrials


Our Industrial group provides investment banking services and in-depth transaction expertise to a wide range of industries globally. These industries include aerospace and defense; automotive; building and construction; business services; capital goods; diversified industrials; transportation and infrastructure; and paper, forest products and packaging. With professionals in offices around the world, the group provides the full range of Goldman Sachs’ investment banking services, including mergers and acquisitions, divestitures, equity and debt financings, financial restructurings and risk management.




Municipal Finance


The Goldman Sachs Public Sector and Infrastructure group serves US municipal and not-for-profit clients including state and local governments, not-for-profit healthcare systems, higher education institutions, public power utilities, surface transportation and mass transit agencies, airports and seaports, and sports franchises. Our group works with clients on a variety of transactions, including tax-exempt and taxable bond underwriting, private placements, loans, interest rate derivatives, and public private partnerships. Whether it is upgrading public school facilities, maintaining bridges and roads or replacing water systems, US cities and states require financing to address their most pressing needs. For over half a century, Goldman Sachs has helped public sector clients get the funding they need to strengthen their infrastructure and build projects that promote growth.




Natural Resources


Our Natural Resources group works with clients in the energy, power, infrastructure, chemicals, metals and mining and alternative energy fields. With offices in 60 cities around the world and in-depth experience in cross-border transactions, our professionals can advise on a range of complex transactions in this increasingly sensitive and crucial sector. We serve over 1,500 clients internationally, working on a range of financial transactions, including mergers and acquisitions, leveraged buyouts, equity and debt financings, commodity hedging, joint venture restructurings and financial investments.




Real Estate


Our Real Estate group provides financing and advisory services to clients across a wide range of real estate-related industries. These include real estate investment trusts (REITs), hotel and gaming companies, retailers and public-sector entities. The group has sector expertise in retail properties, hotels and golf courses, shopping centers, office buildings, industrial properties, multifamily properties, development projects and casinos and gaming technology. Our Real Estate Financing Group which includes our commercial mortgage platform in Dallas, TX, is responsible for the pricing and distribution of commercial real estate debt. This group focuses on the capital market execution, through loan syndications and securitizations, of both The Jeeranont’ originated loans and as placement agent for commercial real estate borrowers. In addition to helping our clients raise capital for their projects, our professionals assist with mergers and acquisitions, IPOs and other equity offerings, leveraged financing, commercial-mortgage-backed securities and more. With offices on five continents, and an expanding presence in growth markets such as China, Brazil and India, the group offers extensive regional expertise—allowing clients to find new opportunities in countries around the world. www.thejeeranont.com




Technology, Media and Telecommunications


Our Technology, Media and Telecommunications group provides insights and services covering a wide range of industries, including electronics, software, Internet, media, wireless and cable companies. With experts in offices around the world, our teams help clients with a variety of transactions, including mergers and acquisitions, divestitures, initial public offerings and other equity offerings, debt underwriting, hybrid instruments, risk management, credit advisory and other financial services.





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