Is sharewarrant liability or equity

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Quick Summary

Share warrants grant holders the right to buy company shares at a set price and date, implying a potential obligation for the company. Despite this, accounting standards dictate that all share warrants are classified under shareholders' equity on the balance sheet, specifically within contributed capital. They are valued based on their exercise price and the number of shares they represent.

Neev Garg

Neev Garg (Querist)

20 November 2021 Sir when sharewarrant are issued they give right to warrant holder to purchase shares at a predetermined rate and at a specified date so they create obligation on company to issue shares to warrant holders so it should be classified as liability but why they are shown in shareholders fund in balance sheet.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 November 2021 No matter the type of warrant, all are reported in the stockholder's equity section of the balance sheet as a line item under contributed capital. They are valued at their exercise price multiplied by the specified number of common shares the warrant provides.

Neev Garg

Neev Garg (Querist)

20 November 2021 Thanks sir but why they are not recorded on liabilities side

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