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IAS 32 — Classification of liability for prepaid cards issued by a bank in the bank’s financial statements

Date recorded:

The Project manager introduced the Agenda paper 4: IAS 32 Financial Instruments: Presentation —  Classification of liability for prepaid cards issued by a Bank in the Bank’s financial statements. He said that in the last discussion held by the Committee it was tentatively decided to analyse more complex arrangements, including loyalty programs to consider the basis for distinction with prepaid cards. He then said that the staff recommendation was that (i) the obligation of the bank for the prepaid card was a financial liability; (ii) loyalty programmes should not be considered in this prepaid card issue (iii) not to proposed a narrow scope amendment to reflect breakage because that could lead to unintended consequences and (iv) not to take the issue into the agenda.  He then opened the discussion to the Committee:

There was general agreement with the staff recommendation. Some Committee members raised concerns that the issue was not only related to banks. Another concern mentioned in the discussion was related to whether the features of the prepaid card should include or exclude the fact that the customer could redeem it not only to third parties but also to the issuer itself.

Some Committee members suggested issuing a narrow scope amendment and also considering the amendments issued under U.S. GAAP (which allowed breakage on the basis of a speech issued by the SEC staff). The Project manager responded that to allow breakage would require amending IFRS 9. One Board member indicated that there would be no justification for treating this particular financial liability different from others.

The Implementation Director indicated that there was general support for the agenda decision, they would delete reference to banks, and also they would take out the observation that the issue was not widespread.

One Committee member raised a concern that the guidance would only be helpful for this particular fact patter. Another Committee member requested to clarify that the discussion did not include loyalty programs.

The Chairman concluded that the staff would consider the proposals for rewording and the majority (13 votes) approved the staff recommendation for the agenda decision.

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