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The Interpretations Committee issues a tentative agenda decision

 17 July 2013


The Interpretations Committee discussed how an issuer would assess the substance of a particular early settlement option included in a financial instrument in accordance with IAS 32 Financial Instruments: Presentation. The instrument has a stated maturity date and at maturity the issuer must deliver a variable number of its own equity instruments to equal a fixed cash amount, subject to a cap and a floor. The cap and floor limit and guarantee, respectively, the number of equity instruments to be delivered. The issuer is required to pay interest at a fixed rate. The issuer has the contractual right to settle the instrument at any time before maturity. If the issuer chooses to exercise that early settlement option, it must:

  1. deliver the maximum number of equity instruments specified in the contract; and
  2. pay in cash all of the interest that would have been payable if the instrument had remained outstanding until its maturity date.

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