If the arrangement in a share-based transaction provides either the entity or the counter party with the choice of cash settlement or issuance of the equity instruments,what is the accounting treatment required in AASB 2?
A) similar treatment with cash-settled transactions if the entity has incurred a liability to settle in cash or other assets
B) similar treatment with equity-settled transactions if the entity has not incurred a liability
C) Where the other party has the right to choose the settlement basis then it should be accounted for simular to a compound financial instrument.
D) All of the given answers are correct.

Question

Quizplus · Accepted Answer

The correct answer is D because AASB 2 requires that transactions where either the entity or the counterparty has the option for cash settlement or the issuance of equity instruments be accounted for in a manner that reflects the substance of the arrangement. This includes treating the transaction similarly to cash-settled transactions if a liability is incurred (A), similarly to equity-settled transactions if no liability is incurred (B), and as a compound financial instrument if the settlement choice lies with the counterparty (C).

If the Arrangement in a Share-Based Transaction Provides Either the Entity