IAS 32

Question 1

Financial instrument

Answer 1

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

Question 2

Financial asset

Answer 2

1. cash
2. an equity instrument of another entity
3. a contractual right
   3.1 to receive cash or another financial asset from another entity; or
   3.2 to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity;
4. a contract that will or may be settled in the entity’s own equity instruments

Question 3

Financial liability

Answer 3

1. a contractual obligation:
   1.1 to deliver cash or another financial asset to another entity; or
   1.2 to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity;
2. a contract that will or may be settled in the entity’s own equity instruments

Question 4

Equity instrument

Answer 4

Any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Question 5

Fair value

Answer 5

the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Question 6

Presentation

Answer 6

1. Whenever an entity has a contractual obligation to deliver cash, the instrument will be a financial liability.
2. Whenever an entity will issue a fixed amount of shares for a fixed amount of cash or another financial asset, the instrument will be an equity instrument.