Representatives of the European Association of Co-operative Banks gave a presentation on principles and mechanisms of co-operatives and the impact of the proposals set out in the Discussion Paper Financial Instruments with the Characteristics of Equity. As this was an education session, no decisions were made.

The representatives informed the Board about the following topics:

• General information about co-operatives
• Shares of co-operatives and share purchases
• Dividends
• Retained earnings
• Redemption of shares
• Liquidation

After this introduction into the mechanisms of co-operatives, the representatives highlighted their current treatment of co-operatives' interests under IFRS, especially in Europe. It was noted that many entities inserted a 'right to refuse redemption' clause in their statutes to be covered by IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments.

Under the ownership approach proposed in the Discussion Paper, it was pointed out that the redemption formula would not approximate fair value as shares of co-operatives were usually redeemed at face value.

Board members asked questions to get a better picture about the problems co-operatives would face under the proposals. At the end of the session, the project staff highlighted a possible issue as the proposals have a substance (of terms and conditions of the contract) notion and as the right to refuse redemption could be deemed as non-substantive this could prevent equity classification under the ownership approach.

The Chairman thanked the representatives for the presentation and closed the session.