The Board published its exposure draft Financial Instruments Puttable at Fair Value and Obligations arising on Liquidation in June 2006. The comment period ended in October 2006. An analysis of the 87 comment letters was presented to the Board in January.
At this meeting, the Board started its redeliberations. The Board discussed the principles underlying the criteria in the exposure draft and instructed the staff to redraft the proposed amendment to highlight the following criteria:
- The instrument must be issued and puttable at the fair value of the instrument.
- The instrument must be in the most subordinated class, and.
- The instrument must participate fully in the performance of the entity over the life of the instrument.
The Board then discussed some issues raised by respondents, and reached the following conclusions:
In a limited partnership, the role of the general partner is to provide a general guarantee. That guarantee is considered separate from the partnership interest. Therefore, the guarantee does not affect subordination of partnership interests.
The Board tentatively decided to retain the existing requirements that all instruments in the most subordinated class are puttable.
Minority interests in subsidiary�s puttable instruments should be presented as liabilities in the consolidated financial statements. Liability classification is not affected by whether the proposed amendment allows those puttable instruments to be classified as equity in the financial statements of the issuing subsidiary. The Board asked the staff to clarify the rationale in the basis for conclusions.
The Board tentatively decided to provide transition guidance on the issue price of previously measured instruments and asked the staff to draft such guidance and bring it to a future meeting.