Accounting for put options written over non-controlling interests

Date recorded:

The Board, upon recommendation from the IFRS Interpretations Committee, discussed a possible scope exclusion to IAS 32 for put options written over the non-controlling interest in the consolidated financial statements of a group. The objective of the scope exclusion would be to address a potential inconsistency between the requirements of IAS 32, IAS 39 and IFRS 9 for measuring financial liabilities and the requirements in IAS 27 and IFRS 10 for accounting for transactions with owners in their capacity as owners; that is, whether the offsetting entry for subsequent measurement changes should be to profit or loss or to equity.

There was rigorous discussion among the Board members, including whether the Board should address such issues on a piecemeal or narrow scope versus holistic basis (e.g., as part of the financial instruments/equity project), whether the entry should actually go to profit or loss or equity, and concerns that the possible scope exclusion was a short term rather than long term solution.

The Board voted not to amend the scope of IAS 32 to exclude these put options over non-controlling interests. The Board, however expressed support for considering addressing the potential inconsistency, by clarifying the accounting for subsequent changes in the measurement of such puts rather than by changing the measurement basis of the non-controlling interest. The Board asked the staff to obtain feedback from the Interpretations Committee on whether they wanted to be involved in further considering this issue.

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