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

## Financial liability  is any liability that is: 

■ A contractual obligation to deliver cash or another fi nancial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity; or 

■ A contract that will or may be settled in the entity’s own equity instruments; and is 

• A non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or 

• A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another fi nancial asset for a fixed number of the entity’s own equity instruments. 

Financial risks  are risks of a possible future change in one or more of the following variables: a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index or prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable, that the variable is not specific to a party to the contract. 

Firm commitment  is a binding agreement for the exchange of a specified quantity of resources at a specified price on a specified future date or dates. 

Foreign currency  is a currency other than the functional currency of an entity within the Group. 

Foreign operation  is an entity that is a subsidiary, associate, joint venture or branch of a reporting entity within the Group, the activities of which are based or conducted in a country or currency other than those of the reporting entity. 

Functional currency  is the currency of the primary economic environment in which an entity within the Group operates. 

General account investments  are investments of which the financial risks are not borne by the policyholder. 

Goodwill  is the amount of future economic benefits arising from assets that are not capable of being individually identified and separately recognized as an asset in a business combination. 

Guaranteed benefits  are payments or other benefits to which a particular policyholder or investor has an unconditional right that is not subject to the contractual discretion of the issuer. 

Hedge effectiveness  is the degree to which changes in the fair value or cash flows of the hedged item that are attributable to a hedged risk are offset by changes in the fair value or cash flows of the hedging instrument. 

Incremental cost  is one that would not have been incurred if the entity had not acquired, issued or disposed of a financial instrument. 

Insurance asset  is an insurer’s contractual right under an insurance contract. 

Insurance contract  is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. 

Insurance liability  is an insurer’s contractual obligation under an insurance contract. 

Insurance risk  is a risk, other than financial risk, transferred from the holder of a contract to the issuer. 

Joint control  is the contractually agreed sharing of control over an economic activity, which exists when the strategic and operating decisions relating to the activity require the unanimous consent of the parties sharing control. 

Liability adequacy testing  is an assessment of whether the carrying amount of an insurance liability needs to be increased (or the carrying amount of related deferred acquisition costs or related intangible assets decreased) based on a review of future cash flows. 

Liquidity risk  is the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments. 

Master netting agreement  is an agreement providing for an entity that undertakes a number of financial instrument transactions with a single counterparty to make a single net settlement of all financial instruments covered by the agreement in the event of default on, or termination of, any contract. 

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