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Financial Instruments Puttable at Fair Value

Date recorded:

Analysis of Comment Letters on the Exposure Draft

The staff presented an analysis of comment letters received on the Exposure Draft of Proposed Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements (ED).

The Board discussed certain aspects of the comments received but no decisions with regard to amendments of the ED were made.

Project Plan

The Board discussed whether to proceed with this project or to await the outcome of the long-term project on Liability and Equity.

About half of the respondents had suggested widening the scope of the project in order to classify as equity additional instruments such as:

  • Financial instruments puttable at no more that its fair value (for example, financial instruments puttable at book value and co-operative capital)
  • Minority interests puttable at fair value
  • Financial instruments puttable at fair value that are not in the most subordinated class but are subordinated to creditors, or financial instruments puttable at fair value that are in the most subordinated class but there exists another class of shares in the most subordinated class without the right to put
  • Warrants (and other derivatives) to be settled by the issue of financial instruments puttable at fair value
  • Financial instruments puttable at fair value with the right to mandatory dividend distribution or partnership remuneration.

The Board members pointed out that the scope of the project is the most critical issue and agreed to keep the scope narrow since otherwise this project could prejudice the outcome of the Liability and Equity project. The Board acknowledged that, accordingly, the project could only resolve the problems in some jurisdictions.

The Board decided to go forward with this project and directed the staff to prepare a paper on the scope issue for discussion at a future meeting.

Correction list for hyphenation

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