Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation

Date recorded:

The staff informed the Board about its intended next steps in this project.

The staff proposed to separate the issues raised in the comment letters on the Exposure Draft (ED) Financial Instruments Puttable at Fair Value and Obligations arising on Liquidation into two work streams:

 

1. Finalisation of the ED by addressing those issues raised in the comment letters that would not require a re-exposure of the ED

This will relate to issues such as:

  • Clarification of what is meant by reference to fair value in the equity classification criteria
  • Clarification of 'the most subordinated class' requirement
  • Whether the issue price of financial instruments puttable at fair value must be at fair value, and whether transitional guidance needs to be included as to what that means
  • The disclosure of the fair values of financial instruments puttable at fair value
  • The effective date of amendments

Staff intends to bring a paper to the May 2007 meeting requesting decisions on these issues.

 

2. Research on those issues raised in the comment letters that might require a re-exposure of the ED

These issues relate to the scope of the amendments. Some respondents noted that criteria for equity classification within the ED are too restrictive and do not cover a number of instruments (such as partnership interests, membership interests in co-operatives, and development banks).

It is intended to bring preliminary considerations on these issues to the Board in June 2007.

Some Board pointed out that the narrow scope of the project had been well-considered and that under no circumstances it should be widened. Other Board members expressed the view that no further research should be performed on issues outside the scope but that this should be part of the equity and liabilities project.

With a majority of 9 votes the Board decided to go ahead with the current scope and to bring back in May 2007 a revised ED addressing the issues outlined under (1) above. In addition, the Board directed the staff to further investigate the issues outlined under (2) above for discussion at a future meeting.

The issues raised in the comment letters were not discussed at this meeting.

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