IFRIC Interpretation 2 on shares in co-ops

  • IFRIC (International Financial Reporting Interpretations Committee) (blue) Image

26 Nov 2004

The International Financial Reporting Interpretations Committee (IFRIC) has issued Interpretation IFRIC 2 'Members' Shares in Co-operative Entities and Similar Instruments' (co-ops).

Members-shares in co-ops have some characteristics of equity.   They also give the holder the right to request redemption for cash, although that right may be subject to certain limitations.

IFRIC 2 gives guidance on how those redemption terms should be evaluated in determining whether the shares should be classified as financial liabilities or as equity. Under IFRIC 2, shares for which the member has the right to request redemption are normally liabilities. However, they are equity if:

  • the entity has an unconditional right to refuse redemption, or
  • local law, regulation, or the entity's governing charter imposes prohibitions on redemption. But the mere existence of law, regulation, or charter provisions that would prohibit redemption only if conditions (such as liquidity constraints) are met, or are not met, does not result in members' shares being equity.

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