1.

Preference shares are classified as equity instruments when

a. They provide for redemptions on a specific date

b. They provide for redemption on a specific date but the issuer cannot satisfy the
obligation to redeem because of lack of funds
c. They provide for redemption at the option of the holder
d. They provide for redemption at the option of the issuer

2. The classification of a preference shares as an equity instrument or a financial liability is

affected by

a. A possible negative impact on the price of ordinary shares of the issuer of distributions
are not made
b. The amount of the issuer’s reserves
c. An ability of inability of the issuer to influence the amount of its profit or loss for the
period
d. None of the above

3. Which of the following will be most likely classified as equity instrument?

a. A preference share that provides for mandatory redemption by the issuer for a fixed
amount at a fixed future date
b. A preference share gives the holder the right to require the issuer to redeem the
instrument after a particular date for a determinable amount
c. A financial instrument that gives the holder the right to put it back to the issuer for cash
or another financial asset
d. A financial instrument that impose on the entity an obligation to deliver to another party
a pro rata share of the net assets of the entity only on liquidation and that is subordinate
to all other classes of intruments