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In this newsletter, we look at the following topic:
HKAS 32 from the issuer's perspective (Part II) - What is meant by 'contractual obligation', and accounting for embedded derivatives
This is the second instalment in a series of three supplements on HKAS 32 Financial Instruments: Presentation. In this newsletter, we will highlight some of the more common financial instruments terms and conditions and explain how they affect the classification of an instrument. In particular, this issue will look at what is meant by 'contractual obligation', and accounting for embedded derivatives.
What is meant by 'contractual obligation'?
- Legal/statutory obligation to pay dividends
- Preference share linkers that link to an ordinary share with a legal/statutory right to pay dividends
- In HKAS 32.25 what is meant by 'liquidation'?
- Is a change in control event within the control of either party to the contract?
- Is an IPO within the control of either party to the contract?
- Shares with an obligation to pay out a percentage of profits
- Legal obligation to launch a takeover bid
Embedded derivatives
- Instruments whose payments are linked to earnings before interest, taxes, depreciation and amortisation or sales revenue
- Components of a foreign currency denominated convertible instrument
- Conversion into warrants
- Contingent settlement options
- Provisional issuer call option to redeem at par
Get Your Copy Here
Read more by downloading our HKFRS News - Aug 2007 (pdf file, 228KB) for your reference.
Note: HKFRS has converged with IFRS effective from 1 January 2005. Contents contained in this newsletter are relevant to both HKFRS preparers and IFRS preparers. Other Issues of HKFRS News
Accounting and Listing Rules Updates |
