Financial Instruments with Characteristics of Equity (Potential Amendments to IAS 32) [ED]
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Comment period ends on March 29, 2024 |
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Next steps: |
Exposure Draft Feedback |
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Last updated: |
November 2023 |
Overview
This project formed part of the Memorandum of Understanding (MOU) between the International Accounting Standards Board (IASB) and the FASB. The MOU sets out a Roadmap of Convergence between IFRS® Standards and US GAAP.
During their joint meeting in November 2010, the IASB and FASB decided to defer further work on this project. In December 2012, as part of its response to the Agenda consultation 2011, the IASB formally reactivated this project as an IASB-only research project. Board discussions were taken up in October 2014. In March 2017, the first phase of deliberations was concluded. A discussion paper DP/2018/1 Financial Instruments with Characteristics of Equity was published in June 2018.
The objective of this project is to improve and simplify the financial reporting requirements for financial instruments with characteristics of equity. Accordingly, this project is expected to identify financial instruments that are difficult to classify under the current requirements of IAS 32 Financial Instruments: Presentation, or those for which the classification is questioned by preparers and users.
IAS 32 sets out how a company that issues financial instruments should distinguish debt instruments from equity instruments. The distinction is important because the classification of the instruments affects the depiction of a company’s financial position and performance.
IAS 32 works well for most financial instruments. However, the instruments have evolved since this IFRS Accounting Standard was initially issued—they are more complex and present new reporting challenges for companies. Companies’ solutions to the reporting challenges differ, resulting in diverse accounting practices that make it difficult for investors to assess and compare companies’ financial position and performance. Investors are calling for better information, particularly about equity instruments.
On November 29, 2023, the IASB published the Exposure Draft Financial Instruments with Characteristics of Equity. The IASB has proposed amendments to address the existing challenges in companies’ financial reporting on financial instruments with characteristics of equity.
The proposals in the Exposure Draft would amend IAS 32 Financial Instruments: Presentation, IFRS 7 Financial Instruments: Disclosures, and IAS 1 Presentation of Financial Statements.
The proposals include:
- clarification of the underlying classification principles of IAS 32 to help companies distinguish between financial liabilities and equity;
- disclosures to further explain complexities around instruments that have both financial liability and equity characteristics; and
- presentation requirements for amounts—including profit and total comprehensive income—attributable to ordinary shareholders separately from amounts attributable to other holders of equity instruments.
Comments on the proposed changes are requested by March 29, 2024.
Access the press release and the exposure draft on the IFRS Foundation website.
Other developments
September 2023
In September 2023, the IASB staff updated the work plan to indicate that the Board plans to issue an exposure draft in November 2023.
June 2023
In June 2023, the IASB staff updated the work plan to indicate that the Board plans to issue an exposure draft in Q4 2023.
May 2023
On May 24, 2023, the IASB staff updated the work plan to indicate that the Board plans to issue an exposure draft in H2 2023 (previously no date given).
April 2023
On April 29, 2023, the IASB staff updated the work plan to indicate that the Board plans to issue an Exposure Draft (no date specified).
November 2022
On November 28, 2022, the IASB staff updated the work plan to indicate that the Board plans to issue an Exposure Draft in the second half of 2023.
December 2020
On December 18, 2020, the IASB staff updated the Work Plan to indicate that the Board plans to issue an Exposure Draft (no date specified).
September 2020
On September 28, 2020, IASB staff updated the Work Plan to indicate that the Board plans to decide the project direction in December 2020.
July 2020
On July 23, 2020, IASB staff updated the Work Plan to indicate that the Board plans to decide the project direction in Q4/2020.
November 2019
On November 25, 2019, the IASB staff updated the Work Plan to indicate that the Board plans to decide the project direction in the second half of 2020.
October 2019
On October 25, 2019, the IASB® staff updated the work plan to indicate that the Board expects to decide the project direction in Q1/2020
On October 1, 2019, the IASB® staff updated the work plan to indicate that the Board expects to decide the project direction in December 2019.
July 2019
On July 29, 2019, the IASB® staff updated the work plan to indicate that the Board expects to decide the project direction in Q4/2019.
March 2019
On March 14, 2019, the IASB® staff updated the work plan to indicate that the Board will decide the project direction in the second half of 2019.
January 2019
On January 25, 2019, the IASB® staff updated the work plan to indicate that the Board expects to review the Discussion Paper feedback in March 2019.
November 2018
In November 2018, the IASB staff updated the work plan to indicate that the IASB expects to review the Discussion Paper feedback in Q1/2019.
July 2018
On July 18, 2018, the IASB® staff updated the work plan to indicate that the Board plans to review the Discussion Paper feedback in the 1st half of 2019.
June 2018
On June 28, 2018, the IASB published a comprehensive discussion paper DP/2018/1 Financial Instruments with Characteristics of Equity. The discussion paper defines the principles for the classification of financial liabilities and equity instruments without, however, fundamentally changing the existing classification outcomes of IAS 32. The IASB's proposed preferred approach is based on two features, timing and amount, and is accompanied by the provision of additional information through a separate presentation of expenses and income from certain financial liabilities in other comprehensive income and additional disclosures. The comment period ends on January 7, 2019.
March 2018
On March 23, 2018, the IASB® staff updated the work plan to indicate that the Board expects to issue a Discussion Paper in June 2018.
January 2018
On January 26, 2018, the IASB Staff updated this project to indicate that the IASB now expects to issue a Discussion Paper in Q2/2018.
September 2017
On September 22, 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue the Discussion Paper in the 1st half of 2018.
June 2017
In June 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue a Discussion Paper in Q4/2017.
March 2017
On March 23, 2017, the IASB staff updated the Work Plan in respect of this project to indicate that this project is now in a drafting stage and that the IASB expects to publish a Discussion Paper for comment after September 2017.
December 2016
On December 15, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Discussion Paper for comment after June 2017.
September 2016
On September 23, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to publish a Discussion Paper for comment sometime after March 31, 2017.
July 2016
On July 20, 2016, the IASB staff updated the Work Plan in respect of this project to indicate that the IASB expects to issue a Discussion Paper for comment sometime after January 31, 2017.
May 2012
This is not an active project of the IASB. At its meeting on May 21-25, 2012, however, the IASB unanimously supported initiating a research programme focusing initially on various items, including financial instruments with the characteristics of equity.
February 2008
On February 28, 2008 the IASB published a Discussion Paper, Financial Instruments with Characteristics of Equity, (“the DP”). The DP was open for comment until September 5, 2008.
