IAS 32Chapter 2Lesson 3
Contingent settlement and settlement options
Step 1 of 6Learning objectives
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A cash settlement depending on an event beyond the control of both parties makes the instrument a liability, unless the clause is not genuine; a derivative whose settlement method one party chooses is a financial asset or liability unless all settlement methods lead to equity.
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Learning objectives
- Explain the effect on classification of a contingent settlement clause beyond the control of the issuer and the holder.
- Analyse a contingent settlement clause to decide whether it is genuine and whether it requires liability classification.
- Explain why a derivative whose settlement method one party chooses is a financial asset or liability, unless all methods lead to equity.
- Determine the classification of a derivative on own shares with a net cash settlement option.