Which of the following statements relating to financial instruments is not correct?
A) They may relate to singular instruments or a combination of instruments.
B) A convertible note with the conversion option to issue shares is a financial liability.
C) Primary instruments include receivables and payables.
D) Derivative instruments include forward exchange contracts.

Question

Quizplus · Accepted Answer

A convertible note is a financial liability until the conversion option is exercised, at which point it may be classified partly as equity. However, the statement as presented suggests that the convertible note in its entirety remains a financial liability even after conversion, which is not accurate. The conversion feature is typically accounted for separately as an equity component in financial statements.

Which of the Following Statements Relating to Financial Instruments Is