Financial Instruments with Characteristics of Equity

The IASB met on 17 June 2025 to discuss possible changes to the presentation and disclosure requirements proposed in the Exposure Draft Financial Instruments with Characteristics of Equity in response to stakeholder feedback, and to decide on:

• the proposed amendments to the presentation requirements for equity instruments in IFRS 18 Presentation and Disclosure in Financial Statements (Agenda Paper 5A);
• the proposed amendments to the disclosure requirements in IFRS 7 Financial Instruments: Disclosures (Agenda Paper 5B);
• the proposed amendments to the disclosure requirements for eligible subsidiaries in IFRS 19 Subsidiaries without Public Accountability: Disclosures (Agenda Paper 5C); and
• the timing for issuing these proposed amendments (Agenda Paper 5D).

Proposed amendments—Presentation of equity instruments (Agenda Paper 5A)

In relation to IFRS 18, the IASB tentatively decided: 

1. to require an entity to present separately, in the statement of profit or loss, the profit or loss attributable to owners of the parent, disaggregated between:
   1. ordinary shareholders;
   2. participating rights holders; and
   3. non-participating rights holders.
2. to require an entity to categorise equity instruments based on the instrument holders’ contractual rights to profit or loss participation as at the reporting date. Therefore, if an equity instrument has both participating and non-participating rights, the entity would present the amounts for profit or loss participation in the line items for both participating and non-participating rights holders in the attribution section of the statement of profit or loss.
3. to specify that the term ‘ordinary share’ has the same meaning as that used in paragraph 5 of IAS 33 Earnings per Share and the Glossary to the IFRS Accounting Standards—that is, an ordinary share is ‘an equity instrument that is subordinate to all other classes of equity instruments’.
4. to define a ‘participating right’ as ‘the right to participate in profit or loss with ordinary shares, with the amount varying based on the entity’s profit or loss for the period’.
5. to define a ‘non-participating right’ as ‘the right to contractually specified amounts (for example, fixed dividends or coupons) before the determination of the profit or loss that is allocated to ordinary shareholders and participating rights holders’.

The IASB tentatively decided to withdraw the proposed presentation requirements related to the statement of financial position and the statement of changes in equity as set out in the Exposure Draft, and instead: 

1. to add requirements to IFRS 7 for an entity to disclose:
   1. information that enables users of financial statements to understand how the entity’s equity instruments relate to the attribution of profit or loss in the statement of profit or loss and the amount of dividends recognised as distributions on these instruments during the reporting period; and
   2. terms and conditions affecting the nature, amount, timing and uncertainty of cash flows of equity instruments with participating rights (those without debt-like features); and
2. to add a requirement to IFRS 18 for an entity to disclose a reconciliation of cumulative undeclared dividends for equity instruments with non-participating rights, showing separately the amounts allocated for the reporting period and any amounts declared during the reporting period.

All 14 IASB members agreed with these decisions.

Proposed amendments—Disclosures (Agenda Paper 5B)

The IASB tentatively decided to retain the proposed disclosure requirements related to the objective, scope and general principles as set out in the Exposure Draft, subject to:

1. including ‘puttable instruments and obligations arising on liquidation’—classified as equity instruments in accordance with paragraphs 16A–16D of IAS 32 Financial Instruments: Presentation—in the scope of the disclosure requirements in IFRS 7 related to the nature of claims as at the reporting date and the terms and conditions;
2. allowing cross-referencing by including the references to the proposed disclosure requirements in paragraph B6 of IFRS 7; and
3. providing application guidance on how to group financial instruments by class.

The IASB tentatively decided to retain the proposed disclosure requirements related to the nature of claims against an entity as set out in the Exposure Draft, subject to:

1. requiring that the disclosure be based on the nature of the claims at the reporting date instead of on liquidation; and 
2. clarifying that the disclosure requirement would apply to:
   1. non-derivative financial liabilities within the scope of the liquidity risk disclosures required by IFRS 7; and
   2. non-derivative equity instruments issued by the entity.

The IASB tentatively decided to retain the proposed disclosure requirements related to terms and conditions as set out in the Exposure Draft, subject to:

1. not requiring an entity to disclose the amounts allocated on initial recognition to the liability and equity components of compound financial instruments;
2. including the requirement to disclose the terms and conditions of compound financial instruments (where relevant) within the requirements in IFRS 7 to disclose terms and conditions of other financial instruments; 
3. excluding some financial liabilities with equity-like characteristics from the scope of the requirement to disclose the terms and conditions of financial instruments—for example, those with only subordination features and those that will be settled by delivering its own equity instruments; and
4. combining the requirements to disclose the terms and conditions about an instrument’s priority on liquidation with the requirements related to the nature of claims against an entity, and limiting the disclosure requirements to:
   1. the terms and conditions of financial instruments that could lead to a change in their nature; and
   2. a description of any intra-group arrangements, such as guarantees, that might affect the nature of financial instruments.

The IASB tentatively decided to retain the proposed disclosure requirements related to maximum dilution of ordinary shares as set out in the Exposure Draft, subject to:

1. clarifying that off-balance-sheet commitments that could result in dilution are included in the scope of the requirements. 
2. adding a requirement that an entity disclose the fact that the number of shares in share buy-back arrangements is unknown, if the maximum spend amount is capped.
3. adding examples of the terms and conditions an entity could disclose to enable users of financial statements to understand the maximum dilution of ordinary shares and the likelihood of maximum dilution occurring. Such examples include the exercise prices, information about whether instruments are anti-dilutive, the par value of convertible instruments, conversion ratios and descriptions of any contingent events that could affect the conversion ratios.

All 14 IASB members agreed with these decisions.

Proposed amendments—Disclosures for eligible subsidiaries (Agenda Paper 5C)

The IASB tentatively decided to retain the proposed disclosure requirements for eligible subsidiaries related to the nature of claims against a subsidiary and the terms and conditions as set out in the Exposure Draft, subject to:

1. reflecting the related changes to the proposed disclosure requirements set out in Agenda Paper 5B; and
2. clarifying that compound financial instruments are within the scope of the proposed disclosure requirements related to terms and conditions (where relevant).

The IASB tentatively decided to add disclosure requirements to IFRS 19 related to the presentation of equity instruments in accordance with Agenda Paper 5A. An eligible subsidiary would be required to disclose:

1. information to enable users of financial statements to understand how the subsidiary’s equity instruments relate to the attribution of profit or loss to different types of equity holders in the statement of profit or loss and the amount of dividends recognised as distributions on these instruments during the reporting period;
2. information about terms and conditions affecting the nature, amount, timing and uncertainty of cash flows of equity instruments with participating rights (those without debt-like features); and
3. a reconciliation of cumulative undeclared amounts for equity instruments with non-participating rights, showing separately the amounts allocated for the reporting period and any amounts declared during the reporting period. 

All 14 IASB members agreed with these decisions.

Timing of issuing the proposed amendments related to presentation and disclosures (Agenda Paper 5D)

The IASB tentatively decided not to expedite the issuance of the amendments related to presentation and disclosure set out in Agenda Papers 5A–5B ahead of those related to classification and other disclosures.

All 14 IASB members agreed with this decision.