11.4 Obligations to Issue a Variable Number of Equity Shares

Under U.S. GAAP, a financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by delivering a variable number of equity shares is classified as an asset or a liability if, at inception, the obligation’s monetary value is based either solely or predominantly on a fixed monetary amount, variations in something other than the fair value of the issuer’s equity shares, or variations inversely related to changes in the fair value of the issuer’s equity shares (see Section 6.1). Obligations to issue a variable number of shares that do not meet the above conditions are typically accounted for as equity under U.S. GAAP.

Under IFRS Accounting Standards, paragraphs 21 and AG27(d) of IAS 32 require all contracts that will be settled in a variable number of shares to be accounted for as assets or liabilities. There is no evaluation of the underlying that affects the monetary value of the contract.