Equity Definition Under Ifrs

Financial liabilities as defined under ias 32 can be exceptionally classified as equity if they meet certain criteria.

Equity definition under ifrs. The expense should be recog nised as the goods or services are consumed. Many instruments that are classified as a financial liability under ifrs could be classified as equity or temporary equity under us gaap and certain instruments that are equity under ifrs could be classified outside equity under us gaap. An instrument is classified as equity when it represents a residual interest in the issuer s assets after deducting all its liabilities. Equity is defined in the iasb s framework as the residual interest in the entity s assets after deducting all its liabilities.

In addition the requirements for equity investments in ifrs 9 are consistent with the board s revised conceptual framework for financial reporting conceptual framework which states that the statement of profit or loss is the primary source of information about an entity s financial performance for the reporting period. Or put another way when the issuer has no obligation under the terms of the instrument to deliver cash or other financial assets to another entity. When an equity instrument is classified at fair value through other comprehensive income under ifrs 9 all the fair value changes are recognised in oci other than dividend income which is recognised in profit or loss. Equity is defined as any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities ias 32 11.

They are puttable instruments ias 32 16a and 16b. There is no concept of temporary equity under ifrs. Ifrs 2 requires the off set ting debit entry to be expensed when the payment for goods or services does not represent an asset. The issuance of shares or rights to shares requires an increase in a component of equity.

Shareholders equity is comprised of all capital contributed to the entity plus retained earnings. Equity along with assets and liabilities is one of the three elements used to portray an entity s financial position. Definition of equity an equity instrument is defined by ias 32 as any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities ias 32 11.