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Wiley IFRS: Practical Implementation Guide and Workbook
Example
Examples ofequity instruments include
• Ordinary shares (that cannot be put back
10
the issuer by the holder)
• Pref erence shares (that cannot be redeemed by the holder or provide for nondiscretionary
dividends)
• Warrants or written call options (that allow the holder to subscribe fo r-or purchase-a
fixe d number of nonputtable ordinary shares in exchange fo r a fixe d amount of cash or an–
other finan cial asset)
2.5
The definition of an equity instrument is brief and succinct, but the defin itions of "financial
asset" and "financial liability" are more compl ex. Summaries of the lAS 32 definiti ons for those
terms follow.
Financial
asse t. Any asset that is
(a) Cash;
(b) An equity instrument of another entity;
(c) A contractual right to receive cash or another financial asset from another entity, or to
exchange financial assets or financial liabilitie s with another entity under conditi ons
that are potentiall y favorable to the entity; or
(d) A contract that mayor will be settled in the entity's own equity instrument and is not
classified as an equity instrument of the entity (discussed below).
Example
Examples ofassets that meet the defin ition ofa fi nancial asset are
• Cash, see (a) above
• Investment in shares or other equity instrument issued by other entities. see (b) above
• Receivables, see (c) above
• Loans to other entities, see (c) above
• Investments in bonds and other debt instruments issued by other entities. see (c) above
•
Derivative fi nancial assets. see (c) above
• Some derivatives on own equity. see (d) above
Financia l liability. Any liability that is
(a) A contractual obligation to deliver cash or another financial asset to another entity; or
to exchange financial assets or financial liabilities with another entity under conditions
that are potentially unfavorable to the entity; or
(b) A contract that will or may be settled in the entity's own equity instruments and is not
classified as an equity instrument of the entity (discussed below).
Example
Examples of liabilities that meet the defin ition offinancial liabilities are
• Payables (e.g.• trade payables}, see (a) above
• Loans from other entities. see (a) above
• Issued bonds and other debt instruments issued by the entity. see (a) above
• Derivative fina ncial liabilities, see (a) above
• Obligations to deliver own shares worth a fixe d amount ofcash. see (b) above
• Some derivatives on own equity. see (b) above
2.6
It follows from the definitions that these assets and liabilities are not financial instruments:
• Physica l assets
(e.g., inventories, property, plant, and equipment). Control of physical assets
creates an opportunity to generate a cash inflow but does not give rise to a present right to re–
ceive cash or another financial asset.
• Leased assets.
Control of leased assets creates an opportunity to generate a cash inflow but
does not give rise to a present right to receive cash or another financial asset.