CERTYNEX IFRS ACADEMY

Aube SA issues 50,000 preference shares at 20 each, or 1,000,000. The contract (case facts) requires Aube to redeem them in cash, at 20 each, five years after issue, with no possibility of refusing. How does Aube classify these shares at issue?

As equity, because the instrument is issued in the form of shares and, as such, takes part in the company's capital, whatever the other terms.

As equity for four years, then as a financial liability as the redemption date approaches.

As a financial liability, because the contract obliges it to deliver cash on a certain date.

As equity, because the redemption price equals the issue price and therefore creates no gain or loss for Aube.