The International Accounting Standards Board (Board) tentatively decided to explore making clarifying amendments to IAS 32 Financial Instruments: Presentation to address common accounting challenges that arise in practice when applying IAS 32. The Board aims to address those challenges by clarifying some underlying principles in IAS 32 and adding application guidance to facilitate consistent application of those principles. In addition, it intends to further develop some presentation and disclosure requirements. The Board’s tentative decisions were made after considering feedback on the Discussion Paper Financial Instruments with Characteristics of Equity, which was published in June 2018.
The Discussion Paper set out the Board's preferred approach to classification of a financial instrument, as a financial liability or an equity instrument, from an issuer’s perspective. The Board also explored enhanced presentation and disclosure requirements that would provide further information about financial instruments’ effects on an issuer's financial position and financial performance.
The Board met on 28 April 2021 to continue its discussions on potential refinements to disclosure proposals explored in its 2018 Discussion Paper Financial Instruments with Characteristics of Equity—namely, proposals for disclosure of information about terms and conditions, priority on liquidation and potential dilution. These disclosure proposals relate to financial instruments an entity issues and, if finalised, would be incorporated into IFRS 7 Financial Instruments: Disclosures.
The Board tentatively decided that, for financial instruments with characteristics of both financial liabilities and equity instruments (except for stand-alone derivatives), an entity would be required to disclose in the notes information about:
All 13 Board members agreed with this decision.
The Board discussed proposals to require an entity to disclose information on its capital structure and terms and conditions that indicate the priority on liquidation of some types of financial instruments.
The Board did not make any decisions but sought clarification on some of the proposals.
The Board tentatively decided to require an entity to disclose information about the maximum dilution of ordinary shares in the notes, including:
Twelve of 13 Board members agreed with this decision.