IAS 32 — Classification of liability for prepaid cards in the issuer’s financial statements

Date recorded:


The Interpretations Committee received a request to clarify how an entity would classify (either as a financial or non-financial liability) in the financial statements of the issuing of a prepaid card with specific features such as no expiry date and that it can only be redeemable for goods or services. The classification was critical to determine whether an entity can derecognise the liability using IAS 39 (IFRS 9) or IAS 37 respectively.

In July 2014, the Interpretations Committee tentatively decided not to add the issue into its agenda. In September 2015 Interpretations Committee concluded that the prepaid card met the definition of a financial liability because the entity had a contractual obligation to deliver cash and did not have an unconditional right to avoid delivering cash to settle the contractual obligation; and consequently an entity would apply the guidance in IAS 39/IFRS 9 to determine when to derecognise the financial liability.

The purpose of this session was to analyse the comments letters received and the wording of the final agenda decision (which included some wording suggestions from the comment letters received). The agenda paper indicated that all the respondents agreed with not adding the issue into the Interpretations Committee agenda.


The Interpretations Committee did not reach a conclusion. There was a decision to bring back the issue to the next meeting, to be held in March, to continue the discussion. There remains a possibility that the Committee will not be able to reach a conclusion.

The concerns were focused on the following:

  • Some Interpretation Committee members believed that the comment letter issued by PWC had not been properly addressed by the staff analysis. The comment letter stated that in the circumstances set out in the fact pattern the item did not meet did not meet the definition of a financial instrument (because there was no financial asset); and accordingly, the transaction was out of scope of IAS 39. Some committee members thought that the item did meet the definition of a financial instrument.
  • Some Interpretation Committee members suggested that the issue of breakage should be discussed with the IASB; because they believed that it would not make economic sense to maintain a liability perpetually. For example, it was mentioned that the most significant economic benefit for issuers of prepaid cards was the potential breakage.
  • Some Interpretation Committee members suggested taking the issue into the agenda and issuing a narrow scope amendment.
  • There were different views as to whether the fact pattern should include or exclude the possibility that the customer can redeem goods or services with the issuer of the prepaid card; given the potential interaction with IFRS 15. On that regard, there were also concerns raised of potential unintended consequences were the Committee to expand the topic.

On the other hand, there was general agreement that the last paragraph of the draft agenda decision, which makes reference to bifurcating transactions including customer loyalty programs, should be deleted. The main argument focused on the fact that they did not know how this requirement would work.

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