SIC issues two draft Interpretations
Sep 13, 2001
The Standing Interpretations Committee has invited comment on two draft Interpretations.
- SIC D33, Consolidation and Equity Method – Potential Voting Rights, proposes that potential voting rights that are presently exercisable or convertible should be considered when assessing whether an enterprise controls or significantly influences another enterprise. All potential voting rights should be considered, including potential voting rights held by other enterprises.
- SIC D34, Financial Instruments - Instruments or Rights Redeemable by the Holder, proposes that the issuer of a puttable instrument should classify the entire instrument as a liability. A puttable instrument is a financial instrument or a right that gives the holder the right to put the instrument or right back to the issuer for cash or another financial asset. The amount payable upon redemption is determined based on an index or other item that has the potential to increase and decrease. The consensus in SIC D34 will affect open-ended mutual funds and certain co-operative organisations by requiring them to present their unitholders' funds as liabilities.
- SIC has also completed its discussions of SIC D27, Transactions in the Legal Form of a Lease and Leaseback, including comments received from the IASB. The SIC reaffirmed its consensus and is redrafting the Interpretation to focus on the principles involved.