SHOW SECTIONS

Current stage

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.

IASB® Update April 2021

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

Disclosures: terms and conditions (Agenda Paper 5A) 

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:

  1. ‘debt-like features’ in financial instruments that are classified as equity instruments; 
  2. ‘equity-like features’ in financial instruments that are classified as financial liabilities; and  
  3. debt-like and equity-like features that determine the classification of such financial instruments as financial liabilities, equity instruments or compound financial instruments. 

All 13 Board members agreed with this decision.  

Disclosures: priority on liquidation (Agenda Paper 5B) 

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.  

Disclosures: potential dilution (Agenda Paper 5C) 

The Board tentatively decided to require an entity to disclose information about the maximum dilution of ordinary shares in the notes, including: 

  1. the maximum number of additional ordinary shares that an entity could be required to deliver for each type of potential ordinary share outstanding at the reporting date. An entity would:
    1. include the total number of share options outstanding (as required to be disclosed by IFRS 2 Share-based Payment) and the number of unvested shares, if known; and
    2. indicate the possibility for unknown dilution where the maximum number of additional ordinary shares that could be delivered is not yet known.  
  2. the minimum number of ordinary shares required to be repurchased. 
  3. sources of any significant changes in (a) and (b) from the prior reporting period and how these sources contributed to those changes. 
  4. terms and conditions relevant to understanding the likelihood of maximum dilution, including a cross-reference to disclosures required by IFRS 2 for a description of share-based payment arrangements. 
  5. a description of any share buy-back programmes or other arrangements that may reduce the number of shares outstanding.   

Twelve of 13 Board members agreed with this decision.  

Next milestone

Exposure Draft


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