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A Ltd. issues an irredeemable bond of face value ₹1,000 carrying perpetual 8% annual interest with no right of return of principal. From the holder's perspective, the bond is:
AAn equity instrument, because there is no maturity date for principal repayment
BA financial asset, because there is a contractual right to receive cash (interest) in perpetuity
CNeither a financial asset nor a financial liability — perpetual instruments are excluded
DA hybrid instrument required to be measured at amortised cost regardless of business model
Answer & Solution
Correct answer: B. A financial asset, because there is a contractual right to receive cash (interest) in perpetuity
A perpetual bond gives the holder the contractual right to receive an indefinite stream of interest cash flows — this satisfies the financial-asset definition under Ind AS 32, even though principal will never be returned. (For the issuer, the same instrument is typically a financial liability or compound instrument because of the perpetual interest obligation.)
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