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Agree, it's a compound instrument, provided there is something left in equity. However, in practice, I would guess that most of the companies would take the shortcut to say it's full liability.

Let me put it differently, if a prefs provides mandatory redemption for the principal amount but the dividends are at the issuer's discretion. That's a compound financial instrument where the present value of the principal is a liability which is discounted by market rate, and the residual value in ...

thanks, why this isn't a compound financial instrument? There is no contractual obligation to pay the principal.

might there be some slight impact on DTA/DTL if that involves two countries within different tax jurisdictions?

Just picking that up out of interest and also wanted to follow up with another question (related). I think, if you conclude that the preference shares are equity instruments, as DJP said, it clearly fails SPPI test. However, I think provided the instrument is not held for trading, the company can st...

Hi, Please allow me to reconsider Marek's position in this post. In a case where a company issue prefs and the prefs are redeemable at the issuer's discretion but provide for a mandatory payment of the dividend each year. In that case, I would say that the principal is classified as equity and the d...

They are borrowers so sppi is not relevant.

Thanks Ketan.

Looking at the definition of an equity instrument under IAS 32, it says: The instrument is an equity instrument if, and only if, both conditions are met: (a) no contractual obligation to be settled in cash (b) if the instrument will or may be settled in the issuer's own equity instrument, it is [......

well, in that case, I believe that could be argued either way, which gives the issuer more freedom.

Thanks Ketan, the case in this thread, where the issuer has the option to convert the prefs into cash or a variable number of shares anytime, without redemption date, is considered as an equity instrument, even if the issuer chose to convert the prefs one day after the shares are issued. However, if...

So you are saying, in this case, if it's convertible at anytime by the issuer, it's equity.

Is there a distinction between, "at anytime before and upon maturity" and "at anytime"?

if they don't deliver cash they will deliver variable number of shares and vice versa

What should I reconsider based on what you just sent? Didn't it say that if it's not fixed for fixed, it's not an equity?

A basic loan agreement with a redemption clause which allows a lender to reclaim payment back from the borrower at anytime, does it make it a puttable instrument?

Continue on the above post, a very straight forward convertible note: Issuer issue a convertible note and the holder has the option to received cash for convert into shares at the maturity. So, this would be treated as a liability for the payment of principal and interest and derivatives liability o...

If the holder ask the issuer to deliver cash and the issuer can't refuse to do so, then, it's a liability. However, where I don't know, which is my question to all the experts here, is if there is conditions in the contract whereby the issuer can do to avoid paying cash. For example, a clause where ...

From an issuer's perspective, I think: 1. Cash payment of interest and principal: May need to know what the qualified and non qualified terms are, whether they are as the holders' discretion or the issuer can trigger some clauses that make them giving shares instead of paying cash back. If there is ...

You are recognising it as a holder I guess, in that case, not expected to satisfy the SPPI criteria because even though it can be converted into a variable number of shares, it seems that there is a cap "90% of the lowest [...]".

FVPL

Hi, 1. A preference shares which gives the issuer the choice either to settle in cash for deliver a variable number of ordinary shares based on the fair value of an ordinary share at conversion date, is an equity instrument or a liability? My view it's a liability, notwithstanding that the issuer ca...

Or maybe an equity instrument with a derivative component, accounted separately? I've no idea

But the issuer can avoid to settle it in cash, and deliver fixed number of shares instead. That looks like equity to me. Because they bear the risk of the change in the price of the shares, similar to a shareholder.

On what basis please, I'm confused again

"And to your last point, the issuer may have the option to either pay in cash or a variable number of ordinary shares, but it does not have the right to avoid paying one or the other. It is a financial liability." That's clear thanks DJP. Sorry for being redundant, if the issuer can choose...

even that the prefs can be converted into a variable number of ordinary shares (e.g., XX ordinary shares at maturity or anytime based on the fair value of the shares at that time) To summarise: The issuer can avoid to pay cash or deliver another financial asset. However, the preference shares can be...

And that's even that the issuer have an option to not pay cash or another financial asset right?

Thanks DJP. One more question from the perspective of the issuer. If the prefs can be converted into a variable number of shares. Even though there is no mandatory payment in cash, can this still be considered as equity instrument?

Are you talking about the individual accounts

I haven't come across a goodwill that didn't arise from a BS. Where did the goodwill come from?