CERTYNEX IFRS ACADEMY

Quartz SA, whose functional currency is the euro, issues a warrant to an investor: on exercise, the investor will receive 20,000 Quartz shares against 100,000 dollars (5 dollars per share), an amount fixed in the contract. The warrant is not offered pro rata to all existing shareholders (case facts). How does Quartz classify this warrant?

As a derivative financial liability, because the exercise price is set in a currency other than the functional currency, so that the amount of cash in euros varies.

As equity, because the number of shares (20,000) and the amount (100,000 dollars) are fixed in the contract, whatever the currency.

As equity, because settlement is by physical delivery of the shares, which is enough to meet the condition.

As a financial liability, because a contract denominated in a foreign currency is by nature a currency derivative, regardless of its settlement method.