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IAS 32 — Accounting for written puts over non-controlling interests to be settled by the variable number of parent’s shares

Date recorded:

IAS 32 Financial Instruments: Presentation — Accounting for written puts over non-controlling interests to be settled by the variable number of parent’s shares — Comment letter analysis and finalisation of agenda decision — Agenda paper 9

Background

In May 2016, the IC tentatively proposed not to add this issue to its agenda on the basis that any discussion on share-settled NCI puts would inevitably re-open the debates already had on cash-settled NCI puts, all of which have been referred to the Board to be considered as part of the Financial Instruments with Characteristics of Equity project because the issue is too broad for the IC to address.

This paper analysed the comment letters received on the tentative agenda decision.

Staff analysis

Some respondents supported the tentative agenda decision subject to redrafting. Those opposing it were concerned that not adding the issue to the IC’s agenda would result in the issue remaining unresolved for an unknown period of time, thus increasing diversity in practice and allowing for structuring opportunities. These respondents asked whether the IC could narrow down the issue, e.g. to whether IAS 32.23 applies to share-settled NCI puts, and address that particular aspect only without addressing other related questions that might arise.

Staff recommendation

The Staff recommended finalising the agenda decision (see Appendix A) unless the IC believes that the issue can be effectively resolved by limiting the analysis to that as proposed above, in which case the Staff will prepare further analysis for discussion at a future meeting.

Discussion

The IC approved the Staff’s recommendation.

Be that as it may, there were a number of IC members who still thought that the issue could be (and should be) dealt with narrowly by referring the readers to IAS 32.21 which would indicate that a gross liability existed for the scenario raised in the submission.

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