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IFRIC 19 — Extinguishing Financial Liabilities with Equity Instruments


  • IFRS 2 Share-based Payment
  • IFRS 3 Business Combinations
  • IAS 1 Presentation of Financial Statements
  • IAS 32 Financial Instruments: Presentation
  • IAS 39 Financial Instruments: Recognition and Measurement


6 August 2009 IFRIC D25 Extinguishing Financial Liabilities with Equity Instruments published Comment deadline 5 October 2009
26 November 2009 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments issued Effective for annual periods beginning on or after 1 July 2010

Summary of IFRIC 19

  • If a debtor issues equity instruments to a creditor to extinguish all or part of a financial liability, those equity instruments are 'consideration paid' in accordance with IAS 39.41. Accordingly, the debtor should derecognise the financial liability fully or partly.
  • The debtor should measure the equity instruments issued to the creditor at fair value, unless fair value is not reliably determinable, in which case the equity instruments issued are measured at the fair value of the liability extinguished.
  • If only part of a liability is extinguished, the debtor must determine whether any part of the consideration paid relates to modification of the terms of the remaining liability. If it does, the debtor must allocate the fair value of the consideration paid between the liability extinguished and the liability retained.
  • The debtor recognises in profit or loss the difference between the carrying amount of the financial liability (or part) extinguished and the measurement of the equity instruments issued.
  • When only part of the liability is extinguished, the debtor must determine whether the terms of the remaining debt have been substantially modified (taking into account any portion of the consideration paid that was allocated to the remaining debt). If there has been a substantial modification, the debtor should account for an extinguishment of the old remaining liability and the recognition of a new liability (see IAS 39.40).

IFRIC 19 addresses only the accounting by the entity that issues equity instruments in order to settle, in full or in part, a financial liability. It does not address the accounting by the creditor (lender).

The following situations are explicitly excluded from the scope of IFRIC 19:

  • the creditor is also a direct or indirect shareholder and is acting in its capacity as direct or indirect shareholder;
  • the creditor and the entity are controlled by the same party or parties before and after the transaction, and the substance of the transaction includes an equity distribution from, or contribution to, the entity; or
  • extinguishing the financial liability by issuing equity shares is in accordance with the original terms of the financial liability.

IFRIC 19 must be applied in annual periods beginning on or after 1 July 2010. Earlier application is permitted. It must be applied retrospectively from the beginning of the earliest comparative period presented.

Click for IASB press release (PDF 109k).

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