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equity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › equity

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • December 17, 2020 at 12:56 pm #600188
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    sir why is equity considered as a financial liability for the issuing company if there is no real contractual obligation to pay any dividends or repay capital either?

    because unless there is a contractual obligation to pay, no financial instrument becomes a liability.

    December 17, 2020 at 2:17 pm #600194
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54738
    • ☆☆☆☆☆

    It is owed to the shareholders. The fact that it is not repaid unless the company is wound up does not stop it being owed to them.

    Again, this is financial accounting rather than AFM.

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