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CMA Final · Corporate Financial Reporting · Accounting of Financial Instruments

Under Ind AS 109 Appendix D, at what point are equity instruments issued to a creditor to extinguish a financial liability initially recognised and measured?

Equity instruments are recognised initially and measured at the date the financial liability, or part of it, is extinguished. That date fixes the fair value used for the shares, and the difference from the liability's carrying amount goes to profit or loss.

  1. AAt the date the renegotiation talks began
  2. BAt the date the financial liability (or part of it) is extinguishedCorrect
  3. CAt the beginning of the financial year in which the shares are issued
  4. DAt the date of the reporting period end following the issue

Explanation

The Appendix states that equity instruments issued are recognised initially and measured at the date the financial liability, or part of it, is extinguished. Dates of negotiation, year start or next reporting date are not the measurement date, so fair value is taken on the extinguishment date.

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