IFRS IC agenda decision - Put options written over non-controlling interests
- Completed
- Completed
- Isabel Batista
Description
In May 2010, the IFRS IC ('the Committee') received a request for guidance on how an entity should account for changes in the financial liability for a put option that has been written over shares held by a non-controlling interest ('NCI Put') in the consolidated financial statements of the parent entity.
The issue arises because of a potential conflict between the guidance in:
(a) IAS 27 Consolidated and Separate Financial Statements which requires transactions with non-controlling interests to be recognised in equity. Put options written over non-controlling interests are a transaction with non-controlling interests that should therefore subsequent measurement of the liability should be recognised in equity; and
(b) IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement which requires put options written over non-controlling interests to be recognised initially as a financial liability with subsequent changes in the carrying amount should be recognised in profit and loss.
In September 2010, the Committee tentatively decided not to add this issue to its agenda, but instead, to recommend to the board that the additional concerns should be addressed as part of the Financial Instruments with Characteristics of Equity (FICE) project.
The Committee observed that IAS 32 and IAS 39 should apply with the effect that the change in NCI Put held by NCI's should be recognised in profit or loss. The project is now closed.
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The issue arises because of a potential conflict between the guidance in:
(a) IAS 27 Consolidated and Separate Financial Statements which requires transactions with non-controlling interests to be recognised in equity. Put options written over non-controlling interests are a transaction with non-controlling interests that should therefore subsequent measurement of the liability should be recognised in equity; and
(b) IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement which requires put options written over non-controlling interests to be recognised initially as a financial liability with subsequent changes in the carrying amount should be recognised in profit and loss.
In September 2010, the Committee tentatively decided not to add this issue to its agenda, but instead, to recommend to the board that the additional concerns should be addressed as part of the Financial Instruments with Characteristics of Equity (FICE) project.
The Committee observed that IAS 32 and IAS 39 should apply with the effect that the change in NCI Put held by NCI's should be recognised in profit or loss. The project is now closed.
