SOLUTION

For the issuer AT Limited, the written option will be classified as a financial liability as the exercise price is fixed and the option can be settled in cash or other financial asset. The option holder has the right to receive cash or other financial assets from the issuer, which results in a financial liability for the issuer.

If the exercise price of the option was variable, then it may be classified as an equity instrument as it will be settled by the exchange of a fixed number of equity shares of AT Limited for a variable amount of cash.

If the derivative instrument (i.e. the written option) is classified as a financial liability, any consideration received (such as the premium received for a written option or warrant on the entity's own shares) is measured initially at fair value and subsequently also at fair value, with fair value changes recognized in profit or loss.