Financial liability

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IAS 32 Financial Instruments: Presentation

A financial liability is any liability that is:

  1. a contractual obligation:
    1. to deliver cash or another financial asset to another entity; or
    2. to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or
  2. a contract that will or may be settled in the entity’s own equity instruments and is:
    1. 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
    2. a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose, rights, options or warrants to acquire a fixed number of the entity’s own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. Also, for these purposes the entity’s own equity instruments do not include puttable financial instruments that are classified as equity instruments in accordance with IAS 32 paragraphs 16A and 16B, instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation and are classified as equity
      instruments in accordance with IAS 32 paragraphs 16C and 16D, or instruments that are contracts for the future receipt or delivery of the entity’s own equity instruments.

As an exception, an instrument that meets the definition of a financial liability is classified as an equity instrument if it has all the features and meets the conditions in IAS 32 paragraphs 16A and 16B or IAS 32 paragraphs 16C and 16D.

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