Page 434 - SBR Integrated Workbook STUDENT S18-J19

Chapter 25

Chapter 12

Example 1

Debt or equity

IAS 32 Financial Instruments: Presentation states that a financial liability is a
contractual obligation to deliver cash or another financial asset. IAS 32 also
states that a financial liability is a contract that obliges the entity to deliver a
variable number of its own equity instruments.

$10 million

Ivy is obliged to pay cash dividends each year and to redeem the shares in
cash. This should be classified as a financial liability.

$5 million

Ivy has a commitment to issue a fixed number of its own equity shares, rather
than a variable number. This should be classified as equity.

428