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Y Ltd. issues a foreign-currency convertible bond. Variability of the conversion ratio that arises SOLELY from foreign-currency movements is treated under Ind AS 32 as:
APermissible only if the bond is denominated in a freely convertible currency
BNot introducing variability for purposes of equity-vs-liability classification — a specific carve-out from IAS 32
CIntroducing variability and therefore disqualifying any equity classification
DTriggering a mandatory split between a host debt and an embedded derivative in every case
Answer & Solution
Correct answer: B. Not introducing variability for purposes of equity-vs-liability classification — a specific carve-out from IAS 32
The Ind AS 32 definition of financial liability includes a specific Indian carve-out: variability arising solely from foreign-currency movements does not, by itself, disqualify a foreign-currency convertible bond from being classified as equity (or as a compound instrument). This is an explicit deviation from IAS 32 and is unique to Ind AS.
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