Assertion (A): Under Ind AS 32, a preference share that mandates redemption by the issuer is classified as a financial liability. Reason (R): The issuer has a contractual obligation to deliver cash or another financial asset to the holder. Choose the correct option.
A.Both A and R are true but R is NOT the correct explanation of A
B.A is true but R is false
C.Both A and R are true and R is the correct explanation of A
Explanation:
Ind AS 32 requires classifying an instrument based on its substance. If a preference share is mandatorily redeemable, the issuer has an unavoidable contractual obligation to pay cash, making it a financial liability, not equity. R correctly explains A.
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