Particulars | IFRS | US GAAP | Indian GAAP |
Financial liability classification |
Capital instruments are classified, depending on substance of issuer’s contractual obligations, as either liability or equity. Mandatorily redeemable preference shares are classified as liabilities |
Similar to IFRS but certain redeemable instruments are permitted to be classified as ‘mezzanine equity’ (i.e., outside of permanent equity).
Mandatorily redeemable instruments with a date or event-certain redemption are classified as liabilities |
No Specific guidance. In practice, classification is based on legal form rather than substance.
All preference shares are disclosed separately as share capital under shareholder’s funds |
Convertible debt | Convertible debt (fixed number of shares for a fixed amount of cash) is accounted for on split basis, with proceeds allocated between equity and debt. | Conventional convertible debt is usually recognised entirely as liability, unless there is a beneficial conversion feature. | Convertible debt is recognised as a liability based on its legal form without any split |
Derecognition of financial liabilities |
Liabilities are derecognized when extinguished. Difference between carrying amount and amount paid is recognised in income statement. |
Similar to IFRS | No specific guidance; in practice, treatment would be similar to IFRS based on substance of the transaction |
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