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Editorial Board on Accounts and Audit
  • Accounting Treatment and Valuation of Share Warrants convertible

    by Manish on Wednesday, May 01, 2019 at 02:20 PM

    Sir, a listed company has issued Share Warrants convertible in Equity Shares of company to another Company to which also Ind AS is applicable. Issuer company as on 31st March 2019 has received 25% of amount against Share Warrants. My query is where is this share warrants to be Reflected in both Issuer as well as Investor Company and what will be valuation of the same. Whether investor company has to take any effect of market value of equity share of Issuer company in its investment a

    Replied byEditorial Board Friday, May 10, 2019 at 08:48 PM

    According to para 11 of Ind AS 32, Financial Instruments: Presentation, share warrants shall be treated as equity instruments if they entitles to their holder to acquire a fixed number of the issuer’s own equity instruments for a fixed amount. If this criteria does not satisfy, i.e., the holders are entitle to receive variable number of issuer’s equity instruments, then share warrants are treated as financial liability. Valuation should be done accordingly as per principles of Ind AS 109, Financial Instruments.

    Presuming that the holder of the share warrant shall get fixed number of equity shares of another company, the share warrants issued shall be classified as ‘Equity’ in the issuer company.

    The investor or holder of share warrants shall recognise the investment as financial asset and valued at fair value as per principles of Ind AS 109. The fair value is determined under Ind AS 113, Fair Value Measurement which takes into consideration the market value of the financial asset while determining fair value.

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