The debt and equity provisions also include the concept of connected entities.
- A connected entity of an entity is either an associate of the entity or another member of the same wholly owned group if the entity is a company and is a member of that group.
The connected entity concept means that it is not only the position of a single entity that is relevant in determining whether a debt or equity interest exists. The position of a connected entity is also relevant in certain circumstances. For example, a financing arrangement can be a debt interest if the entity that has the effectively noncontingent obligation does not receive the financial benefit under the scheme, but a connected entity does. Similarly, for example, the equity test takes into account any connected entity’s ability to determine the amount of financial benefits to be provided by the issuer of a financing arrangement.