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IAS 39 – Classification of a hybrid financial instrument by the holder

Date recorded:

The project manager provided an overview of Agenda Paper 16: Classification of a hybrid financial instrument by the holder. She said that the IFRS Interpretations Committee (IFRS IC) had received a request to clarify the classification of a hybrid financial instrument with a revolving maturity option, an early settlement option and a suspension of interest payments option (all at the option of the issuer) by the holder. Specifically, the submitter raised a question if the host of such financial instrument should be classified by the holder as an equity or as a debt instrument. The staff recommended not taking this issue onto the IFRS IC agenda because the particular fact pattern was not widespread and that the issue was already discussed at IFRIC in the past. Furthermore, the staff believed that IFRS 9 Financial Instruments would resolve the issue as bifurcation would no longer be required. The project manager asked the Committee whether they agreed with the proposed tentative agenda decision provided.

One Committee member disagreed with the wording in the agenda decision that the issue could not be addressed by the Interpretations Committee in an efficient manner. She said that this was not true, in her view. The reason would be instead that the IFRS IC did not want to answer specific fact patterns. Moreover she was not sure if references to past IFRIC decisions could be made. Another Committee member also said that the wording should be changed with regard to the IFRS IC not being able to deal with the issue efficiently.

One IFRS IC member agreed with the proposed tentative agenda decision. His main reason for his agreement was the future obsolescence of the issue. This was supported by another Committee member.

The chairman asked the project manager whether he had the right understanding that the issuer classification did not have to mirror the holder classification. The project manager agreed. He asked if any of the IFRS IC members objected to the rejection notice. Nobody objected.

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