Amendments to IAS 32, Financial Instruments: Presentation and Disclosure

Date recorded:

Puttable Instruments

The Board agreed to retain a liability classification for puttable instruments (whether conditional or not) and to emphasise alternative presentations that would be consistent with IAS 1. Consequential amendment to IAS 1 may be needed.

Treasury Share Transactions

The Board agreed not to change the classification of a commitment to repurchase an entity's own shares as a liability, but the final standard will clarify that this does not apply to agency transactions for clients.

Separating the Liability and Equity Components of Compound Instruments

The Board agreed that the method of separation should not be prescribed in a revised IAS 32.


The Board discussed two issues:

  • Risk disclosure.
  • Fair value disclosure.

The Board agreed to retain the proposals in the ED regarding risk disclosure but noted that this is being discussed, with respect to financial institutions, as part of the IAS 30 project. The Board also agreed to retain the fair-value-related disclosures proposed in ED paragraphs 77B(a), (b), (c), and (e), and to check the US requirements (both SEC and FASB) before finalising the sensitivity disclosure proposed in paragraph 77B(d).

Derivative and Non-Derivative Contracts on Own Equity

The Board discussed various examples of contracts on an entity's own equity and agreed that the answers provided under the ED were appropriate. The staff proposed to amend the definitions and clarify the ED to identify the principles more clearly. The Board expressed concern that if no re-exposure is planned the changes could lead to major unintended consequences. Consequently, the Board asked the staff to submit proposed changes for consideration at future meeting at which a decision will be made.

Economic Compulsion

The ED proposed to eliminate the notion in existing IAS 32.22 that an instrument that the issuer is economically compelled to redeem because of a contractually accelerating dividend should automatically be classified as a financial liability. The Board agreed to retain the proposal in the ED but to clarify that, in most cases the instruments are liabilities.

Contingent Settlement Provisions

The ED proposed to require liability classification for any financial instrument that the issuer could be required to settle by delivering cash or other financial assets, depending on whether uncertain future events occur or depending on the outcome of uncertain circumstances, without regard to the probability of those events or circumstances occurring. The Board agreed to review the drafting regarding the effect of clauses that have no realistic possibility of occurring. The staff proposed that if the contingent settlement is dependant on an entity's own equity, the instrument should be assessed to determine whether it is a compound instrument. The staff proposed to remove paragraph IAS 32.19 (probability of settlement).

Parent Guarantees of Distributions

The Board discussed whether additional terms (such as a guarantee of payments or redemption) agreed directly by a parent entity with the holders of its subsidiary's equity instrument should result in a liability classification of those instruments in the consolidated financial statements. The Board agreed to liability classification in the consolidated financial statements at the amount of the guarantee.

Treatment of Derivatives on Interests in Subsidiaries, Associates, and Joint Venture

The Board agreed that such derivatives are within the scope of IAS 32 and IAS 39.

Offsetting of Financial Assets and Liabilities

The Board agreed that management intention should be a factor in offsetting financial assets and liabilities.

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