IASB March 2009
The Board published the discussion paper Financial Instruments with Characteristics of Equity in February 2008. In October the Board decided to begin deliberations using the principles underlying the perpetual and basic ownership approaches. At this meeting, the Board continued to discuss an approach for determining whether a financial instrument should be classified as equity.
The Board decided tentatively that the following instruments should be classified as equity:
- An ownership instrument that is redeemable at the option of the issuer
- An ownership instrument that is puttable or mandatorily redeemable only upon the holder’s retirement or death. (The term retirement is used broadly to include events such as termination, resignation or ceasing to be a member in a co-operative or partnership.)
The Board decided tentatively that an ownership instrument that is mandatorily redeemable on a specific date, a range of dates or an event that is certain to occur (other than retirement or death) should be classified as a liability.
The Board directed the staff to analyse further whether the following instruments should be separated into equity and liability components:
- an ownership instrument that is mandatorily redeemable upon an event that is uncertain to occur
- an ownership instrument that is puttable upon an event other than retirement or death.
The Board also directed the staff to analyse further how a limited life entity would classify its ownership instruments.
Location: London UK
Date: 12/03/2009
Observer Notes