Consistency and Money market: Difference between pages

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1.  ''Financial reporting - accounting concepts.''
Money markets trade short-term financial instruments, generally with a life up to one year.  


One of a small number of fundamental accounting concepts.
Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.


Consistency requires that like items be treated consistently within each accounting period and between accounting periods.
Important short term interest conventions are:


This helps to ensure that financial information is comparable over time.


1. For GBP yield instruments: Actual/365 days


2.  ''Cohesion - trust - comparability.''
So Simple periodic interest = Quoted nominal annual rate x [Actual days]/365


The quality of being aligned with other relevant things, and free from logical contradictions.
For example a 272 day sterling yield instrument quoted at 4% would pay periodic interest of:


When statements are consistent with earlier and other statements, the level of trust toward the source of the statements increases.
= 4% x 272/365


Stating amounts on a consistent basis, such as an effective annual rate, makes them comparable.
= 2.9808% per 272 day period
 
 
2. For EUR, USD and most other currencies yield instruments: Actual/360 days
 
So Simple periodic interest = Quoted nominal annual rate x [Actual days]/360
 
For example a 272 day USD yield instrument quoted at 4% pays periodic interest of:
 
= 4% x 272/360
 
= 3.0222% per 272 day period.




== See also ==
== See also ==
* [[Accounting concepts]]
* [[Capital market]]
* [[Accruals concept]]
* [[Depo market]]
* [[Cohesion]]
* [[International money market]]
* [[Confidence]]
* [[Market]]
* [[Disaggregation]]
* [[Money market fund]]
* [[Double entry]]
* [[Money market lines]]
* [[Double entry bookkeeping]]
* [[Nominal annual rate]]
* [[Effective annual rate]]  (EAR)
* [[Simple interest]]
* [[Goal congruence]]
* [[Wholesale markets]]
* [[Going concern]]
* [[Integration]]
* [[Journal]]
* [[Ledger]]
* [[Prudence]]
* [[Trust]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Long_term_funding]]

Revision as of 08:42, 22 August 2013

Money markets trade short-term financial instruments, generally with a life up to one year.

Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.

Important short term interest conventions are:


1. For GBP yield instruments: Actual/365 days

So Simple periodic interest = Quoted nominal annual rate x [Actual days]/365

For example a 272 day sterling yield instrument quoted at 4% would pay periodic interest of:

= 4% x 272/365

= 2.9808% per 272 day period


2. For EUR, USD and most other currencies yield instruments: Actual/360 days

So Simple periodic interest = Quoted nominal annual rate x [Actual days]/360

For example a 272 day USD yield instrument quoted at 4% pays periodic interest of:

= 4% x 272/360

= 3.0222% per 272 day period.


See also

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