IAS 39 Financial Instruments: Recognition and Measurement: Classification of a hybrid financial instrument by the holder
The issue relates to the classification of a hybrid financial instrument with the following keys terms:
- a fixed maturity of 30 years extendable at the option of the issuer;
- a fixed interest rate that is stepped up after 10 years; and
- the issuer can skip interest if no dividends are paid on the entity's common stock.
The question of the submission is whether the host contract of such an instrument should be classified by the holder as an equity or as a debt instrument under IAS 39.