IFRIC proposal on debt extinguishments
07 Aug 2009
The International Financial Reporting Interpretations Committee (IFRIC) has published a draft Interpretation, IFRIC D25 'Extinguishing Financial Liabilities with Equity Instruments'.
The proposal addresses the appropriate accounting under IFRSs when a creditor agrees to accept an entity's shares or other equity instruments to settle the financial liability fully or partially. IFRIC D25 proposes that:
- an entity's equity instruments are part of any 'consideration paid' to extinguish a financial liability.
- the equity instruments should be measured at either their fair value or the fair value of the financial liability extinguished, whichever is more reliably determinable.
- any difference between the carrying amount of the financial liability extinguished and the initial measurement amount of those equity instruments should be included in the entity's profit or loss for the period.
