Which of the following statements is true about a share option:
A) The nature of the holder's right in relation to the option is affected by the likelihood that the option will be exercised.
B) The nature of the holder's obligations in relation to the option are affected by the likelihood that the option will be exercised.
C) The likelihood of the option being exercised does not affect its classification as a financial liability.
D) The likelihood of the option being exercised does affect its classification as a financial liability.

Question

Quizplus · Accepted Answer

The classification of a share option as a financial liability or equity instrument under accounting standards (such as IFRS) is determined by the terms and conditions of the option itself, not by the likelihood of the option being exercised.

Which of the Following Statements Is True About a Share