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Classification of a financial instrument under Ind AS 32 as a financial liability or as equity is made:
AFrom the perspective of the holder
BFrom the perspective of the issuer
COn the basis of the instrument's legal form rather than its substance
DBy the auditor based on independent judgement of substance
Answer & Solution
Correct answer: B. From the perspective of the issuer
Ind AS 32.11 is clear that classification is from the ISSUER'S perspective. The same instrument may be a financial asset for the holder and a financial liability or equity for the issuer. Substance — not legal form — governs the call; the auditor verifies but does not originate it.
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