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IAS 32 – Classification of instruments denominated in a foreign currency


IAS 32 Financial Instruments: Disclosure and Presentation states that a derivative instrument relating to the purchase or issue of an entity’s own equity instruments is classified as equity only if it results in the exchange of a fixed number of equity instruments for a fixed amount of cash or other assets.

IFRIC considered the issue of how to classify a convertible bond denominated in a foreign currency (i.e. a currency other than the functional currency of the entity issuing the bond). Such a bond allows the holder to convert the bond into a fixed number of the entity's equity instruments in exchange for a fixed amount of foreign currency.

For example, an entity whose functional currency is the Euro issues a US dollar-denominated convertible bond that can be converted into a fixed number of the entity's equity instruments (i.e. it contains an option to exchange a fixed number of the entity's shares for a fixed amount of US dollars).


Current status of the project

In 2005, the IFRIC decided to recommend that the IASB amend IAS 32 to permit a conversion or stand-alone option to be classified as equity if the exercise price was fixed in any currency. In September 2005 the Board decided not to proceed with the proposed amendment.

IFRIC removed this project from its agenda at its November 2006 meeting.

The IASB also later considered a project on the classification of rights issues denominated in foreign currency and issued an amendment to IAS 32.


Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.