PRESENTATIONLiabilities and equity (see also paragraphs AG13-AG14J and AG25–AG29A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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16When an issuer applies the definitions in paragraph 11 to determine whether a financial instrument is an equity instrument rather than a financial liability, the instrument is an equity instrument if, and only if, both conditions (a) and (b) below are met.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>Puttable instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16AA puttable financial instrument includes a contractual obligation for the issuer to repurchase or redeem that instrument for cash or another financial asset on exercise of the put. As an exception to the definition of a financial liability, an instrument that includes such an obligation is classified as an equity instrument if it has all the following features:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16BFor an instrument to be classified as an equity instrument, in addition to the instrument having all the above features, the issuer must have no other financial instrument or contract that has:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>Instruments, or components of 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16CSome financial instruments include a contractual obligation for the issuing entity to deliver to another entity a pro rata share of its net assets only on liquidation. The obligation arises because liquidation either is certain to occur and outside the control of the entity (for example, a limited life entity) or is uncertain to occur but is at the option of the instrument holder. As an exception to the definition of a financial liability, an instrument that includes such an obligation is classified as an equity instrument if it has all the following features:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16DFor an instrument to be classified as an equity instrument, in addition to the instrument having all the above features, the issuer must have no other financial instrument or contract that has:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>Reclassification of puttable instruments and 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16FAn entity shall account as follows for the reclassification of an instrument in accordance with paragraph 16E:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>No contractual obligation to deliver cash or another financial asset (paragraph 16(a)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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18The substance of a financial instrument, rather than its legal form, governs its classification in the entity’s statement of financial position. Substance and legal form are commonly consistent, but not always. Some financial instruments take the legal form of equity but are liabilities in substance and others may combine features associated with equity instruments and features associated with financial liabilities. For example:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19If an entity does not have an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the obligation meets the definition of a financial liability, except for those instruments classified as equity instruments in accordance with paragraphs 16A and 16B or paragraphs 16C and 16D. For example:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>Settlement in the entity’s own equity instruments (paragraph 16(b)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>Contingent settlement provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25A financial instrument may require the entity to deliver cash or another financial asset, or otherwise to settle it in such a way that it would be a financial liability, in the event of the occurrence or non-occurrence of uncertain future events (or on the outcome of uncertain circumstances) that are beyond the control of both the issuer and the holder of the instrument, such as a change in a stock market index, consumer price index, interest rate or taxation requirements, or the issuer’s future revenues, net income or debt-to-equity ratio. The issuer of such an instrument does not have the unconditional right to avoid delivering cash or another financial asset (or otherwise to settle it in such a way that it would be a financial liability). Therefore, it is a financial liability of the issuer unless:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>EFFECTIVE DATE AND TRANSITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
97C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>
Equity instruments
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AG13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>The class of instruments that is subordinate to all other classes (paragraphs 16A(b) and 16C(b)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>Total expected cash flows attributable to the instrument over the life of the instrument (paragraph 16A(e)). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>Transactions entered into by an instrument holder other than as owner of the entity (paragraphs 16A and 16C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14G. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14H. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<CommentaryRef Ref="key-cc9014e68bf2c332fc721f378669be70"/>No other financial instrument or contract with total cash flows that substantially fixes or restricts the residual return to the instrument holder (paragraphs 16B and 16D). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG14JA condition for classifying as equity a financial instrument that otherwise meets the criteria in paragraph 16A or paragraph 16C is that the entity has no other financial instrument or contract that has (a) total cash flows based substantially on the profit or loss, the change in the recognised net assets or the change in the fair value of the recognised and unrecognised net assets of the entity and (b) the effect of substantially restricting or fixing the residual return. The following instruments, when entered into on normal commercial terms with unrelated parties, are unlikely to prevent instruments that otherwise meet the criteria in paragraph 16A or paragraph 16C from being classified as equity:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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AG27The following examples illustrate how to classify different types of contracts on an entity’s own equity instruments:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AG29A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .