CERTYNEX IFRS ACADEMY

A colleague drafts conclusions on the classification of derivatives on own equity instruments with a settlement option. Which of these conclusions is wrong?

A derivative for which one of the parties chooses the settlement method is a financial asset or liability, unless all the settlement alternatives lead to equity.

The choice of settlement method may lie with the issuer or with the counterparty without changing the classification of principle of the derivative, which remains that of a financial asset or liability.

To conclude that an instrument is equity, every conceivable settlement alternative must itself result in equity.

The presence of an alternative that delivers a fixed number of instruments for a fixed amount of cash is enough to classify the derivative as equity, even if another alternative is net settlement.