The Board reached the following tentative conclusions on issues that it had identified when reviewing a pre-ballot draft of an exposure draft proposing amendments to IAS 33 Earnings per Share:
- In February 2008 the Board amended IAS 32 Financial Instruments: Presentation. That amendment classifies some puttable financial instruments and obligations as equity. At this meeting, the Board decided tentatively that this classification should also apply for IAS 33. The exposure draft will not include specific material on the treatment for earnings per share (EPS) of a financial liability that is subsequently reclassified to equity.
- The exposure draft will clarify that the method described in paragraphs 45 � 47 of IAS 33 should apply to a forward contract to sell an entity�s own shares. US GAAP refers to this method as the treasury stock method.
- Share-based payment awards might give rise to a tax deduction that exceeds the related cumulative remuneration expense. IAS 12 Income Taxes states that an entity should recognise the resulting current or deferred tax directly in equity. The exposure draft will clarify that, in calculating EPS, an entity should include this tax benefit in the proceeds from the assumed exercise of dilutive share-based payment awards.
- The Board affirmed the proposed principles for the EPS calculation of gross physically settled forward contracts to buy an entity�s own shares. For EPS, those ordinary shares should be treated as repurchased. IAS 32 states that those forward purchase contracts give rise to a liability measured at the present value of the redemption amount. The Board clarified that if dividends on ordinary shares subject to a forward purchase contract are not remitted back to the entity, the liability meets the definition of a participating instrument in IAS 33. The method described in paragraphs A13 and A14 of IAS 33 would apply (described in US GAAP as the two-class method). In contrast, if dividends are remitted back to the entity, the liability does not meet the definition of a participating instrument. The staff will consider when finalising the drafting how those principles would apply to forward purchase contracts and written put options that have a settlement price different from fair value.
- The exposure draft will propose that the principles for gross physically settled forward contracts to buy an entity�s own shares should also apply to mandatorily redeemable ordinary shares.
- Early application of the proposed amendments to IAS 33 should not be permitted.
The Board discussed whether the amendments to IAS 1 to introduce a comprehensive income figure point to a need for further amendments to IAS 33. The Board observed that this question is outside the scope of the short-term convergence project.