instrument conditional on the holder (the counterparty) exercising its contractual obligation to repurchase is right to redeem. Which of the following statements is correct a. The instrument is a financial liability because when the holder exercises its redemption right, Entity A does not have the unconditional right to avoid making the from the perspective of Entity A? n equity instrument because Entity A's payment. contractual obligation to deliver cash or another financial asset is conditional on the holder exercising its right to b. The instrument is an рayment. c. Entity A initially classifies the instrument as an equity instrument. However, when the holder exercises its redemption right, the instrument is reclassified to financial liability. d. The instrument is classified as a financial liability only up to the extent of the probability that the holder will exercise its right to redeem the instrument.

instrument conditional on the holder (the counterparty) exercising its contractual obligation to repurchase is right to redeem. Which of the following statements is correct a. The instrument is a financial liability because when the holder exercises its redemption right, Entity A does not have the unconditional right to avoid making the from the perspective of Entity A? n equity instrument because Entity A's payment. contractual obligation to deliver cash or another financial asset is conditional on the holder exercising its right to b. The instrument is an рayment. c. Entity A initially classifies the instrument as an equity instrument. However, when the holder exercises its redemption right, the instrument is reclassified to financial liability. d. The instrument is classified as a financial liability only up to the extent of the probability that the holder will exercise its right to redeem the instrument.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

4. Entity A issues an instrument that is re-purchasable by
delivering cash or another financial asset. However, Entity A's
and financial liability remain unaltered.
delivo 1ssues an instrument that is re-purchasable by

right to redeem. Which of the following statements is correct
c. Entity A initially classifies the instrument as an
d. The settlement of a liability at an amount below or above
holder exercises its redemption right, Entity A does not
conditional on the holder (the counterparty) exercising its
to the extent of the probability that the holder will exercise
contractual obligation to repurchase the instrument
redemption right, the instrument is reclassified to financial
instrument. However, when the holder exercises its
asset is conditional on the holder exercising its right to
contractual obligation to deliver cash or another financial
have the unconditional right to avoid making the
d. The instrument is classified as a financial liability only up
b. The instrument is an equity instrument because Entify A's
a. The instrument is a financiai liability because when the
contractual obligation to
is
holder exercises its redemption right, Entih. when
making
a. The instrument is a
not
the
payment.
b. The instrument is an
рayment.
C. Entity A initially classifies the instrument as
equity
redemption right, the instrument is reclassified to fi Is
liability.
d. The instrument is classified as a financial liability only.
to the extent of the probability that the holder will exers
its right to redeem the instrument.
5. A gain or loss may arise from which of the following?
a. The initial recognition of the debt and equity components
of a compound financial instrument.
b. The purchase, sale, issue or cancellation of the entity's
own equity instruments.
c. The conversion of bonds into the entity's own equity
instrument.
d. The settlement of a liability at an amount below or abo
its carrying amount.

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