Chapter CFM21250

Published date16 April 2016
Record NumberCFM21250
CourtHM Revenue & Customs
IssuerHM Revenue & Customs

Compound financial instruments are non-derivative financial instruments which have both a liability and an equity component. In accordance with the substance of the contractual arrangements, IAS 32 and Section 22 of FRS 102 both require the component parts to be accounted for and presented separately as financial liabilities, financial assets or equity instruments.

For example, a bond convertible by the holder into a fixed number of ordinary shares of the issuing company is a compound financial instrument. From the perspective of the issuer, such an instrument comprises two components: a financial liability (a contractual arrangement to deliver cash or another financial asset) and an equity instrument (a call option granting...

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