IAS 32

Question 1

How are instruments classified?

Answer 1

Into financial assets, financial liabilities and equity

Question 2

Differentiation between financial liability and equity?

Answer 2

Whether an entity has an obligation to deliver cash

Question 3

What happens with a compound financial instrument (e.g. convertible bond)?

Answer 3

Split into equity and liability components

Question 4

What happens when a transaction is settled in the issuer’s own shares?

Answer 4

Classification depends on whether numebr of shares to be issued is fixed or variable

Question 5

How is Equity component is measured when instrument is issued?

Answer 5

Difference between FV of compund instrument and liability instrument

Question 6

When are financial assets and financial liabilities offset?

Answer 6

Only when entity has a legally enforceable right to set off recognised amounts

Intends to settle on net basis

Realise asset and settle liability simultaneously