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1.
In a part
What is the meaning of the para where its written ” contingent settlement provision requiring settlement in cash or a variable no of entity’s own share only on the occurence of an event which is very unlikely to occur……”
Are they talking about compound instruments where we classify it as debt and equity?2.
In b part
What is the meaning of substance and what is ” considering substance rather than legal form” ?1. Means ‘they might have to pay cash or issue shares but it’s fairly unlikely’ – as the number of shares is variable, it’s of the nature of a liability.
2. If I sell some some sausages to the bank for 10 and later repurchase them for 12, it looks like a sale and repurchase (legal form). However, in reality it’s more like a loan secured on the sausages (commercial substance)
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