LIABILITIES AND OWNERS EQUITY

SCOPE The Standard establishes the principles that financial instruments issued to investors in their capacity as owners should normally be regarded as equity.Thereafter the standard is provided for the classification of financial instruments as either liabilities or equity,and for addressing the accounting for equity instruments. The standard is applicable to the classification of all types of financial instruments except the following which is provided elsewhere:

Interests in subsidiaries, associates and joint ventures that are accounted for in accordance with Section 9, 14 or 15 Employers rights and obligations under employee benefit plans, to which Section 28 Employee Benefits applies. contracts for contingent consideration in a business combination (see Section 19 Business Combinations
and Goodwill). Financial instruments, contracts and obligations under share-based payment transactions to which Section 26 applies, except that paragraphs 22.322.6 shall be applied to treasury shares purchased, sold, issued or cancelled in connection with employee share option plans, employee share purchase plans, and all other share-based payment arrangements. Accounting for equity instruments issued to employees and other vendors acting in their capacity as vendors of goods and services are therefore included in,which deals with share-based payments.The standard ,however applies to treasury shares to the extent that these are utilized in fulfilling employee share option plans,and in other share-based payment arrangement.

DEFINITIONS The Standard provides the following definitions: Equity Equity is the residual interest in the assets of an entity after deducting all its liabilities. Financial Instrument A financial instrument is a contract that gives rise to a financial asset of one entity, and a financial liability or equity instrument of other entity. Financial Liability (a) a contractual obligation : (i) to deliver cash or another financial asset to another entity,or (ii) to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity;or

(b) a contract that will or may be obliged to deliver a variable number of the entitys own equity instruments and : (i) under which the entity is or may be obliged to deliver a variable number of the entity own equity instruments ;or (ii)will or may be settled other that by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entitys own equity instruments .For this purpose, the entity own equity instruments do not include instruments that are themselves contracts for the future receipt.

DEEMED EQUITY CLASSIFICATIONS The deemed equity classification criteria state that some financial instruments that meet the definition of a liability are classified as equity because they represent a residual interest in the net assets of the entity. The deemed equity criteria override the definition of a liability and the instrument are therefore classified as equity. The first criteria relates to puttable instruments, and the second relates to instruments that provides the holder with pro-rata share of the net assets of an entity only upon liquidation.

Puttable Instruments A puttable instrument is defined as a financial instrument that gives the holder theright to sell that instrument back to the issuer for cash or another financial asset or is automatically redeemed or repurchased by the issuer on the occurrence of an uncertain future event or the death or retirement of the instrument holder. Only puttable instruments that have all the following five features are classified as equity: The holder is entitled to pro-rata share of the entity net assets in the event of liquidation. The instruments is the most subordinate class of instruments ,or is in the class of instruments that is repaid after all other obligations are settled. All financial instruments in the most subordinate class of instruments that is have identical features. Apart from the contractual obligation for the issuer to repurchase orredeem the instrument for cash or another financial asset, theinstrument does not include any contractual obligation to deliver cash or another financial asset to another entity, or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity, and it is not a contract that will or may be settled in the entitys own equity instruments. The total expected cash flows attributable to the instrument over thelife of the instrument are based substantially on the profit or loss, thechange in the recognized net assets or the change in the fair value of the recognized and unrecognized net assets of the entity over the life of the instrument (excluding any effects of the instrument).For example,the expected cash flow could be based on eitheir profit or loss,the changed in the recognized net assets, or the change in the fair value of the recognized and unrecognized net assets of the entity. All other puttable instruments are calssified as liabilities. *Possible puttable instruments are generally issued by mutual funds,unit trusts,co-operatives and similar entities. To classify membership interest as equity it should have all the foolowing features: Each member is pro-rata entitled to the net value of the co-operative on liquidation. Members interests is subordinate to any other claims. All members have the same rights

 The puttable festure is the only financial instruments feature. Cash flows are only based on dividends and repayments of the share net assets Entitlement Upon Liquidation Instruments are also deemed to be equity if they impose on the entity an obligation to deliver to another party a pro-rata share of the net assets of the entity only upon liquidation.Any entitlement before that date will render such an instrument a liability.To qualify,the instruments must also be subordinate to all other classes of instruments. A portion of an instruments may also be classified as equity under these provisions.Ordinary shares and other non-puttable eqity instruments will normally fall under this provision. INSTRUMENTS CLASSIFIED AS LIABILITIES Based on the definitionand deemed equity criteria,the standard provides the following four example of instruments that should be classified as liabilities: An instruments that entitles the holder to a distribution of net assets upon liquidation subject to amaximum amount (a ceiling) The holder of an instruments which is entitled to an amount of the pro-rata share of the net assets of the entity measured on some other accounting basis,such as local GAAP The instruments obliges the entity to make payments to the holder before liquidation ,such as a mandatory dividend feature A preference share that provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date,or gives the holder the right to require the issuer t redeem the instruments at or after a particular date for a fixed or determinable amount MEMBERS SHARE IN CO-OPERATIVE ENTITIES

Membersshare in co-operative entities and similar instruments (e.g.,interests in parnership and farming co-operations)are classified as equity if either : y y The entity has an unconditional right to refuse redemption of the members shares. The redemption is unconditionally prohibited by local law,regulation,or the entitys constitution.

If the entity could not refuse redemption,the members shares are classified as liabilities.

ORIGINAL ISSUE SHARES OR OTHER EQUITY INSTRUMENTS Ordinary shares or other equity instruments are recognized as when the instruments are issued and another another party is obliged to provide cash other resources in exchanged for the instruments. Issuance of Shares The Standard provides guidance on how to account for different types of share issue situations, including:

When the shares are issued before the cash or other resources are received, the amount receivable is presented as an offset to equity in the SFP and not as an asset (effectively no additional equity is recognized until the consideration is received). When cash or other resources are received before the shares are issued, and the entity has no obligations to repay the cash or other resources already received, the cash or resources received are recognized as an increase in equity. Any shares subscribed for, before the shares are issued, for which no cash has been received cannot be recognized as equity.

Measurement of Equity Instruments Equity instruments are initially measured at the fair value of the cash or other resources received or receivable after deducting the direct cost of issuing the equity instruments. When payment is deferred and the time value of money is material, the initial measurement is the present value of consideration receivable. Transaction costs are deducted from equity net of any related income tax effect. Presentation of Shares or Other Equity Instruments The presentation of the issued shares, shareoptions, rights, and warrants in the statement of financial position is determined by applicable local laws. Share premium maybe presented separately from the par value of shares if required in a particular jurisdiction. Issue of Share Options, Rights, and Warrants The above recognition and measurement principles for equity instruments are also applicable to share options, rights, warrants and similar equity instruments. CAPITALIZATION AND BONUS SHARE ISSUES, AND SHARE SPLITS A capitalization or bonus issue is the issue of new shares to shareholders in proportion to their existing holdings without additional consideration. A share split is the dividing of an entitys existing shares into multiples shares .Previous outstanding shares may be replaced by new shares. *Total equity is not adjusted as a result of capitalization and bonus share issues, and share splits. Total equity is not changed due to capitalization, bonus issues, and share splits. The amounts recognized in equity are reclassified as required by applicable laws with no overall change in total equity.

CONVERTIBLE DEBT AND SIMILAR COMPOUND FINANCIAL INSTRUMENTS

A convertible debt or similar compound financial instruments that contain both a liability and an equity component must be split between the liability and equity component on initial recognition. The Standard requires that the fair value of the liability component be determined first. The amount of the liability component is determined as the fair value of a similar that liability does not have a conversion feature or similar associated equity component. The balance of the proceeds is the equity components relative fair value. The initial allocation is not revised in later periods. Interest on repayment of the liability component is recognized by using the effective interest method. The Standard requires that the fair value of the liability component be remeasured at each reporting date. The amount of the equity component is never remeasured.

WITHHOLDING TAX ON DIVIDENDS An entity must account for any withholding tax on dividends as a liability owing to the relevant tax authority. The amount owing to shareholders is reduced accordingly.

TREASURY SHARES Treasury shares are defined as the equity instruments of an entity that have been issued and subsequently re-acquired by the entity. The fair value (including cash)of the consideration given for treasury shares is deducted from equity. No gain or loss may be recognized in profit or loss on the purchase,sale,re-issue,or cancellation of treasury shares because this represents transactions in an entitys own equity. DISTRIBUTION TO OWNERS Equity is reduced with the amount of distributions to owners after adjusting any related income tax effects. Withholding tax payable on behalf of shareholders forms part of the dividend charged to equity. *Distributions to owners, such as dividends, are deducted in equity. Distribution of Non-cash Assets to Owners Dividend can also be paid in a distribution of assets other than cash to shareholders. Such distributions are recognized when the entity has an obligation to distribute the non-cash assets. The dividend liability is measured at the fair value of the assets to be distributed. The amount recognized must subsequently be remeasured at each reporting date and at the date of settlement

to reflect changes in the fair value of the assets to be distributed. Such changes are recognized as adjustments to liability amount of the distribution and the contra-entry to equity. NON-CONTROLLING INTEREST Previously referred to as minority interests, on-controlling interest in the net assets of a subsidiary forms part of equity in the consolidated financial statements. Changes in parents equity interests that do not result in a loss of control are regarded as transactions with equity holders in their capacity as equity holders ,and are therefore recognized in equity interest is adjusted to reflect the change in the parents interest in the subsidiarys equity. Any difference between the amount of such adjustment and the fair value of the consideration paid or received is recognized directly in equity as attributable to shareholders of the parent. The carrying amount of any assets (including goodwill) or liabilities may not be adjusted as a result of such transactions. *Transactions are recognized in profit or loss if control is lost. DIFFERENCES BETWEEN IFRS FOR SMEs AND FULL IFRS

IFRS FOR SMEs The classification between equity and liabilities starts and with the definition of a liability and then specific of the deemed provisions.The deemed provisions,however, definition differs from full IFRS. other

FULL IFRS The classification between equity liabilities is based on the substance transaction by applying first the of a financial liabilities and then specific deemed requirements

The concept of,IFRIC 17 Non-cash distributions to owners in full IFRS,is included as one paragraph in the Standard.However,the Standard is silent on the treatment of the profit on the distribution of the non-cash assets to an owner.