Classification of Financial Instruments

Comparison between Indian GAAP and Ind-AS/ IFRS

Under Indian GAAP, financial instruments are classified in the financial statements on the basis of its legal form. E.g. redeemable preference shares will be classified as equity.

However, under Ind-AS/ IFRS, financial instruments are classified as a liability or equity according to the substance of the contractual arrangement (and not its legal form). Accordingly, redeemable preference shares will be classified as a liability in the financial statements.

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