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CMA Final · Corporate Financial Reporting · Accounting of Financial Instruments

Under the Ind AS 109 guidance on extinguishing financial liabilities with equity instruments, how must the gain or loss arising on such extinguishment be presented?

The gain or loss is recognised in profit or loss and must be disclosed as a separate line item in profit or loss or in the notes. It is not adjusted against share premium, retained earnings, or deferred.

  1. ADirectly in retained earnings with no disclosure
  2. BAs a separate line item in profit or loss or in the notesCorrect
  3. CNetted against share premium on the shares issued
  4. DDeferred and amortised over the life of the shares

Explanation

The difference between the carrying amount of the liability extinguished and the consideration paid is recognised in profit or loss, and the entity must disclose it as a separate line item in profit or loss or in the notes. It is not taken to equity or deferred.

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