IASB ED on puttable shares
Jun 22, 2006
The International Accounting Standards Board (IASB) has published an exposure draft on 'Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation'.
The proposals would amend IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements.
The ED would require:
- An obligation to redeem or repurchase a financial instrument puttable at fair value would be classified as equity provided that specified criteria are met, particularly that all financial instruments in the most subordinated class of instruments with a claim to the assets of the entity are financial instruments puttable at fair value.
- An instrument that imposes an obligation to deliver to another entity a pro rata share of the net assets of the entity upon its liquidation to be classified as equity, provided specified criteria are met. Thus, for example, ordinary shares of limited life entities and partners' interests in a partnership that must liquidate upon exit of a partner (e.g. on retirement or death) would be equity.
Comments are due by 23 October 2006. The ED will be available on the IASB's website on 3 July 2006.
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