Solution:

The fact that the Class B shares have a cap on the amount payable on liquidation does not necessarily mean that they do not have an entitlement to a pro rata share of the residual assets of the entity. It simply means that their entitlement is limited to a maximum amount.

According to the International Accounting Standards (IAS 32), a financial instrument is classified as equity if it represents a residual interest in the assets of an entity after deducting liabilities. The fact that the Class B shares have an entitlement to a pro rata share of the residual assets of the entity on liquidation means that they do represent a residual interest and therefore can be classified as equity instruments.

However, the cap on the amount payable to Class B shareholders means that their entitlement is limited, which could be seen as having a characteristic of a financial liability. Therefore, the Class B shares can be considered as having a feature of a financial liability.

In summary, the Class B shares can be classified as equity instruments with a feature of a financial liability due to the cap on the amount payable on liquidation.

The financial instruments in this case are two classes of puttable shares issued by ABC Limited - Class A shares and Class B shares. The Class B shares have the following features:

1. On liquidation, the Class B shareholders are entitled to a pro rata share of the entity's residual assets.
2. However, the entitlement of Class B shareholders is capped at a maximum of $10,000,000.
3. The Class B shares are also puttable, which means that the shareholders have the right to put the shares back to the issuer for a fixed price.

Based on these features, the Class B shares can be classified as equity instruments with a feature of a financial liability. This is because the Class B shareholders have a claim on the residual assets of the entity, which is a characteristic of equity instruments. However, the cap on the amount payable to Class B shareholders means that they have a limited entitlement, which is similar to a financial liability.

The fact that the Class B shares are puttable means that the shareholders have the option to sell the shares back to the issuer for a fixed price. This feature is similar to a financial liability because the issuer has an obligation to repurchase the shares at a fixed price, which is a characteristic of financial liabilities.

In contrast, the Class A shares have no limit on their entitlement to share in the residual assets of the entity on liquidation. This means that they are pure equity instruments with no characteristics of a financial liability.

Therefore, the Class B shares issued by ABC Limited are equity instruments with a feature of a financial liability due to the cap on the amount payable on liquidation and the puttable feature. The Class A shares are pure equity instruments with no such features.