On 28 February 2008 the International Accounting Standards Board (IASB) published for public comment a discussion paper on the distinction between equity financial instruments and other financial instruments (non-equity instruments).

The discussion paper is the first stage of the IASB’s project to improve and simplify the requirements in IAS 32 Financial Instruments: Presentation. Stakeholders around the world have raised two broad classes of criticisms of the current requirements:

  • the principles in IAS 32 are difficult to apply
  • the application of those principles can result in an inappropriate classification of some financial instruments

The project is a modified joint project between the IASB and the US Financial Accounting Standards Board (FASB). In a modified joint project, one board leads the initial stage. The FASB led the research stage of this project and published a Preliminary Views document Financial Instruments with Characteristics of Equity in November 2007.

The IASB has not deliberated the proposals in the FASB document and does not have a preliminary view. The goal of the discussion paper is to solicit the views of interested parties on whether the proposals in the FASB document are a suitable starting point for the IASB’s deliberations. The outcome of the consultations will be essential in determining the future direction of the project. If the project is added to the IASB’s active agenda, the IASB intends to undertake it jointly with the FASB.

The Discussion Paper was open for comment until 5 September 2008.

Document Title
Discussion Paper
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