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Should an issuer classify the issuance of a financial instrument as an equity or a liability? This webinar will closely examine all the relevant facts and conditions, including the critical issues to be aware of, when determining whether the instrument issued is an equity or a liability or a compound financial instrument.
- Characteristics of an obligation and a residual interest
- How to determine substance over legal form in financial instrument contracts
- How to determine substance of the contractual agreements
- Significant professional judgements are required to determine appropriate classification such as:
- When the entity does not have an unconditional right to avoid delivery cash
- When the contractual terms do not explicitly establish a contractual obligation to deliver cash
- Where the financial instruments give one party a choice over how it is settled
- Where there are contingent settlement provisions
- What are puttable instruments and how obligation arises from such instrument
- Examine the exemptions to the obligation principles where a puttable instrument can be classified as a liability
- Examine the contractual term when settlement is in the entity’s own equity instrument
- Examining a contract that allow an entity to settle by using fixed number of own equity shares for a fixed amount of obligation
- Identifying the conditions that give rise to a compound financial instrument
- Case studies on complex contractual terms such as “Irredeemable Convertible Unsecured Loan Stock’ or ‘Redeemable Convertible Unsecured Preference Shares’ or perpetual financial obligation etc.
This workshop qualifies for 2 CPE hours in Financial Reporting Standards and Pronouncements (Category 1).
What you will learn
Confidently exercise professional judgement in determining the issued financial instrument as an equity or liability
Accountants and Auditors
Danny Tan has over 40 years of working experience in public practice, commerce and industry.
In the last 25 years he is a partner of a consulting firm providing technical training and consultancy in financial reporting topics. His clients’ profiles include multinational companies, governments, regulators and professional institutions, auditors and lawyers. Danny held several honorary advisory roles in financial reporting committees and working group in IFRS technical issues. He is currently a project manager with the Malaysian Accounting Standards Board.