ACCA FR · Chapter 7 · Question 9 of 10
Under IAS 32, which of the following should be classified as a financial liability by the issuer?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Preference shares that must be redeemed for cash on a fixed future date
Explanation
A financial liability involves a contractual obligation to deliver cash or another financial asset. Mandatorily redeemable preference shares create that obligation, so they are liabilities and their dividends are finance costs. Ordinary shares, discretionary irredeemable preference shares and 'fixed for fixed' warrants are equity instruments.
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