Definition Of Equity Under Ias 32

Paragraph ias 32 35 sets out the main principle under which interest dividends losses and gains e g.

Definition of equity under ias 32. Those with characteristics of equity can be more challenging leading to diversity in. Ias 32 outlines the accounting requirements for the presentation of financial instruments particularly as to the classification of such instruments into financial assets financial liabilities and equity instruments. Ias 32 financial instruments. The standard also provide guidance on the classification of related interest dividends and gains losses and when financial assets and financial liabilities can be offset.

An equity instrument is defined by ias 32 as any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities ias 32 11. However classifying more complex financial instruments under ias 32 e g. In line with ias 32 11 an equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Presentation sets out how an issuer distinguishes between a financial liability and equity and works well for many simpler financial instruments.

On redemption or refinancing relating to financial liabilities are recognised in p l whereas payments on equity instruments are debited directly to equity. It is also helpful to look at an equity instrument through a reversed definition of a financial liability discussed above i e. Paragraph ias 32 ag37 illustrates application of this rule to compound financial.