The International Accounting Standards Board has published Discussion Paper on how companies issuing financial instruments should classify them in their financial statements.

IAS 32 Financial Instruments: Presentation currently sets out how a company that issues financial instruments should distinguish financial liabilities from equity instruments. Some companies find it challenging to classify some complex financial instruments that combine some features of both debt—liabilities—and ordinary shares—equity instruments. In addition, investors have been calling for better information, particularly about equity instruments.

The Board seeks feedback on this proposed approach that would:

• provide a clear rationale for why a financial instrument would be classified as either a liability or equity without fundamentally changing the existing classification outcomes of IAS 32; and
• enhance the information provided through presentation and disclosure.

This approach would provide investors with richer and more comparable information about financial instruments issued by companies. Clearer principles will help companies accounting for financial instruments they issue both now and as financial instruments continue to evolve.

How to Comment:

Comments on the abovementioned Discussion Paper may be submitted through any of the following modes.

Further clarifications on any aspect of this Discussion Paper may be sought by e-mail to asb@icai.in.