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Put written on non-controlling-interests (IASB only)

Date recorded:

In May 2012, the Committee published a draft Interpretation on the accounting for put options written by a parent on the shares of its subsidiary that are held by non-controlling interest shareholders (NCI puts). The comment period ended on 1 October 2012.

At this meeting, the Board was presented with a summary and an analysis of the comments received on the draft Interpretation, as well as details of the Committee’s subsequent deliberations of the draft Interpretation following the comment period.

The staff noted that many respondents to the draft Interpretation believed that either the Committee or the IASB should address the accounting for NCI puts (or other aspects of the accounting for all put options and forward contracts on an entity’s own equity) more comprehensively. Those respondents said that aspects of the accounting for those contracts have resulted in diversity in practice. Moreover, some of the respondents believed that the requirements, which are to measure particular derivatives written on an entity’s own equity instruments on a gross basis at the present value of the redemption amount, do not result in useful information

Considering this feedback, as part of its January 2013 meeting, the Committee decided to ask the IASB to reconsider the requirements in paragraph 23 of IAS 32 for put options and forward contracts written on an entity’s own equity. In particular, the Committee believed the Board should consider whether NCI puts and NCI forwards should be accounted for differently from other derivatives written on an entity’s own equity.

Therefore, at this meeting, the staff asked the Board whether it wanted the Committee to finalise the draft interpretation (subject to tentative decisions reached by the Committee during its January 2013 meeting), delay finalisation of the draft interpretation until the Board reconsiders the requirements in paragraph 23 of IAS 32 or some other alternative.


Several Board members, referencing recent discussions by the Board on the Conceptual Framework as as it relates to debt versus equity classification when applying IAS 32, noted that this was an evolving area, and therefore, preferred that the Committee delay finalising the draft Interpretation. However, a few Board members disagreed with this view – noting that a practice issue exists and delaying as a result of what may theoretically occur as part of the Conceptual Framework and/or subsequent standards-level project is unhelpful to constituents. Therefore, these Board members supported finalisation of the draft Interpretation.

This led to a more theoretical debate by many Board members over whether the draft Interpretation provided an appropriate result. While some supported the results communicated in the draft Interpretation, others expressed support for alternative views, including:

  • Recognising changes in the measurement of NCI puts directly in equity.
  • Applying an approach more consistent with an approach proposed by the Committee in 2011 (amending the scope of IAS 32 such that the measurement basis of certain NCI puts would be consistent with other derivative contracts - NCI puts would be initially and subsequently measured on a ‘net’ basis at fair value with all changes in fair value recognised in profit or loss in accordance with IAS 39 or IFRS 9 rather than being measured on a ‘gross’ basis), but limiting the scope of the proposals to fair value puts.

The Committee Chair, who attended the meeting, suggested that the Board should not seek to define an alternative model at this meeting. Instead, the focus should be on whether the draft Interpretation should be finalised or delayed.

When put to a vote, the Board narrowly decided to request that the Committee delay finalising the draft Interpretation. In order to avoid requesting that the Committee again consider this issue, as this project has been on-going for an extended period of time, the IASB Chair suggested that this project should be a Board exercise going forward. The IASB Chair directed the staff to consider the results of today’s discussion and bring back a paper to a future meeting on how best to move forward.

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