Under IAS 32, How Should an Equity Instrument Be Classified

question 38

Multiple Choice

Under IAS 32, how should an equity instrument be classified?

• A) It must always be classified as equity by its very nature.
• B) The entity has the option of classifying it as a liability or equity.
• C) If it contains a contractual obligation that meets the definition of a financial liability, it should be classified as a liability.
• D) The entity should apportion the classification between liability and equity if there is a contractual obligation that meets the definition of a financial liability.

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Definitions:

CS Preexposure Effect

The phenomenon where prior exposure to a conditioned stimulus without the unconditioned stimulus can inhibit the formation of a conditioned response when both are later paired.

Aversion

A strong dislike or disinclination toward something often because of anticipated negative consequences or outcomes.

Shock

A sudden and often distressing stimulus or event, which can be used in experiments as a form of aversive conditioning.

Comparator Model

A cognitive theory suggesting that the decision to act is based on comparisons between the expected outcome of an action and the current state.