Equity instrument classification determines whether features create financial liability, equity, or a compound instrument. An equity instrument evidences a residual interest in an entity's assets after liabilities. Classification depends on whether there is a statutory right or obligation to deliver cash or another financial asset. Redeemable instruments that create an obligation to transfer cash are Financial Liability; instruments payable only on liquidation or exercisable at the issuer's option are Equity. Mandatory interest or dividend payments indicate Financial Liability; discretionary payments indicate Equity. Conversion into a variable number of own shares is Financial Liability; compulsory conversion into a fixed number is Equity; conversion at either party's option yields a compound financial instrument.