Question 3 The difference between debt and equity in an entitys statement of Financial position is not easily distinguishable for preparers of Financial statements. Debts and equity financial instruments may have similar characteristics which may lead to inconsistency of reporting.

Required:

a. Discuss the main distinguishing features in the presentation of debt and equity under International Financial reporting Standards (IFRS) with clear examples. (10 Marks) b. Explain why it is important for entities to understand the impact of the classification of a financial instrument as debt or equity in the financial statement. (5 Marks) (Total 15 Marks