IAS 32 - Financial Instrument Presentation

Question 1

What is the definition of “Equity”?

Answer 1

Equity is any contract which evidences a residual interest in the entity’s assets after deducting all of its liabilities

Question 2

What is a “Financial Liability”?

Answer 2

The key feature of debt is that the issuer is obliged to deliver either cash or another financial asset to the holder.
The contractual obligation may arise from a requirement to repay principal or interest or dividends.

Question 3

When is a financial instrument an equity instrument?

Answer 3

A financial instrument is normally an equity instrument:

if the instrument includes no contractual obligation to deliver cash or another financial asset to another entity (such as ordinary shares).