What Is a Financial Liability?

Answer:

Any liability that is:

• A contractual obligation:
  • To deliver cash or another financial asset to another entity; or
  • To exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or

• A contract that will or may be settled in the entity’s own equity instruments and is:
  • A non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or
  • A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose the entity’s own equity instruments do not include puttable financial instruments classified as equity instruments, instruments 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 are classified as equity instruments, or instruments that are contracts for the future receipt or delivery of the entity’s own equity instruments.