The IASB is seeking comments on proposed guidance to clarify when a financial instrument should be classified as a liability or as equity.
IAS No. 32, Financial Instruments: Presentation, currently outlines how companies that issue financial instruments should distinguish financial liabilities from equity instruments. While the standard has worked well for most financial instruments, some companies have found it difficult to classify complex financial instruments that combine features of both debt and ordinary shares.
Their classification can affect how an entity’s financial position and performance are characterized, so the distinction between them is important. As a result, the IASB has published an IFRS Standards Discussion Paper, Financial Instruments with Characteristics of Equity, to address diversity in accounting practices related to IAS No. 32.
Comments on the Discussion Paper are invited and will be accepted until Jan. 7, 2019.