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Under Ind AS 32, a "financial instrument" is defined as:
AAny contract under which one party will receive or pay cash within twelve months
BAny monetary asset or monetary liability of the entity
CAny contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity
DAny tradeable security listed on a recognised stock exchange in India
Answer & Solution
Correct answer: C. Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity
The Ind AS 32 definition is two-sided: there must be a contract that simultaneously creates a financial asset for one party AND a financial liability or equity instrument for another. Listing, monetary classification or near-term cash flows are not the test.
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