Financial Instruments with Characteristics of Equity

In November 2023, the International Accounting Standards Board (IASB) published the Exposure Draft Financial Instruments with Characteristics of Equity. The IASB proposed amendments to IAS 32 Financial Instruments: Presentation, IFRS 7 Financial Instruments: Disclosures, and IAS 1 Presentation of Financial Statements* to address the existing challenges in companies’ financial reporting of financial instruments with characteristics of equity.

The proposals include:

• clarification of the underlying classification principles of IAS 32 to help companies distinguish between financial liabilities and equity;
• disclosures to further explain complexities around instruments that have both financial liability and equity characteristics; and
• presentation requirements for amounts—including profit and total comprehensive income—attributable to ordinary shareholders separately from amounts attributable to other holders of equity instruments.
  

The comment period closed on 29 March 2024. The IASB is considering stakeholder feedback and redeliberating the proposals.

* In April 2024 the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements which replaces IAS 1. IFRS 18 has an effective date of 1 January 2027.