Fungible: Difference between revisions
New definition of fungible |
|||
| Line 1: | Line 1: | ||
====Definition==== | ====Definition==== | ||
Assets are fungible where their nature allows them to be replaced in whole or in part with other assets of a like nature. | Assets are fungible where their nature allows them to be replaced in whole or in part with other assets of a like nature. However, it applies only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not describe or relate to any exchange of one commodity for some other, different commodity. | ||
For example shares can be described as fungible as you can replace | For example shares in a company can be described as fungible as you can replace those shares with other equivalent shares in the same company. However, shares of an equivalent value in another company would not be considered a valid replacement. | ||
Money can also be considered a fungible asset. If you borrow £10 from someone, you do not need to give the same £10 note back. You could give that person another £10 note, or two £5 notes, or any combination of coins that add up to £10 (as long as they are happy to accept that may coppers!) | |||
Revision as of 16:05, 11 February 2013
Definition
Assets are fungible where their nature allows them to be replaced in whole or in part with other assets of a like nature. However, it applies only to the equivalence of each unit of a commodity with other units of the same commodity. Fungibility does not describe or relate to any exchange of one commodity for some other, different commodity.
For example shares in a company can be described as fungible as you can replace those shares with other equivalent shares in the same company. However, shares of an equivalent value in another company would not be considered a valid replacement.
Money can also be considered a fungible asset. If you borrow £10 from someone, you do not need to give the same £10 note back. You could give that person another £10 note, or two £5 notes, or any combination of coins that add up to £10 (as long as they are happy to accept that may coppers!)