Financial liability
A financial liability generally includes a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or liabilities on potentially unfavourable terms; specified settlement in an entity’s own equity can also qualify. IAS 32 contains the detailed conditions.
Worked example
An issued loan note requires the issuer to repay cash, creating a financial liability subject to assessment of its terms.
Common mistake
Do not classify an instrument as equity merely because management calls it a share; examine the contractual obligations.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Supporting | September 2026–June 2027 |
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |