Contract is settled through the entity’s own equity instrument
When a contract is settled through the entity’s own equity instrument, can it be regarded as equity?
A contract that will be settled by the entity receiving or delivering a fixed number of its own shares for no future consideration or exchanging a fixed number of its own shares for a fixed amount of cash or another financial asset, is an equity instrument.
If such a contract can be settled by the entity by receiving or delivering a variable number of its own shares for an amount that is not yet determined (variable), then such contract should be classified as a financial liability. This is so because the entity here uses its equity instrument as a currency to settle a financial liability.