The Boards decided to consider an approach that would classify as equity particular share-settled instruments. Under that approach, an issuer would classify as equity an instrument it must settle by issuing equity instruments unless the issuer is using the equity instruments as currency. Examples of circumstances in which the issuer is using its equity instruments as a form of currency are the following:
- Either party has a cash settlement option.
- The contract requires net settlement in shares or either party has a net settlement option.
- The contract exposes either party to risks of changes in value other than those resulting from share price changes, time value of money, counterparty performance risk, and possibly foreign currency (if the counterparty is a foreign owner before the transaction).