FASB converges some liability classifications with IAS 32 and IAS 39

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17 May 2003

The US Financial Accounting Standards Board has issued Statement 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which requires an issuer to classify certain financial instruments as liabilities.

The FAS 150 classifications are essentially consistent with the classifications under IAS 32 and IAS 39 (as proposed to be amended). Also, because FAS 150 has a limited scope, it does not address a number of liability-equity questions that are addressed under IAS 32 and IAS 39, such as accounting for compound instruments and for contingently redeemable instruments, but the FASB intends to address those issues in a later phase of the project. Under FAS 150, three types of instruments would be classified as liabilities by the issuer:
  • Mandatorily redeemable shares.
  • Instruments that do or may require the issuer to buy back some of its shares in exchange for cash or other assets.
  • Obligations that can be settled with shares, the monetary value of which is fixed, tied solely or predominantly to a variable such as a market index, or varies inversely with the value of the issuers' shares.

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