Financial Instruments – Derivatives on own equity

Financial Instruments – Derivatives on own equity

We report on the IASB’s latest discussions on its financial instruments projects.

KPMG IFRS Newsletter: Financial Instruments publication image: windsurfer jumping a wave

We report on the IASB’s latest discussions on its project on financial instruments with characteristics of equity.

More challenges have emerged as the Board addresses the classification of derivatives on own equity.

The IASB continued its discussions on financial instruments with characteristics of equity in October 2015.

It discussed the challenges of accounting for derivatives on own equity, and how the requirements of IAS 32 Financial Instruments: Presentation deal with those challenges.


“Derivatives on ‘own equity’ present complex accounting challenges that will continue to haunt the Board’s efforts to renew its approach to equity/liability classification.”


For more detail on these discussions, read Issue 27 of our IFRS Newsletter: Financial Instruments.

Accounting for derivatives on own equity

Having previously discussed the classification of non-derivatives, the staff noted that accounting for derivatives on own equity presents challenges in addition to the issues discussed for non-derivatives, because derivatives have other pertinent characteristics.

The staff discussed those challenges, and how IAS 32 currently deals with them. Their analysis focused on the ‘fixed-for-fixed’ condition and the ‘redemption obligation’ requirements under IAS 32. The Board generally agreed with this analysis.

The classification of specific types of instruments such as contingent convertible bonds (CoCos) and put options written on non-controlling interests (NCI puts) will be considered at a future meeting.

Next steps for the project

The next steps for the project will be to further address the conceptual challenges of the ‘fixed-for-fixed’ condition in IAS 32.

Other matters discussed

The Board continued its discussions on a package of temporary measures to address concerns about implementing IFRS 9 Financial Instruments before the forthcoming insurance contracts standard comes into effect. See Issue 49 of our IFRS Newsletter: Insurance.

The Board was also provided with a summary of the activities of the Transition Resource Group for Impairment of Financial Instruments (‘the ITG’) and informed about an issued relating to the measurement of expected credit losses for revolving credit facilities. Read our web article to find out more.

The macro hedge accounting project was not discussed during the October meeting.  

Find out more

Visit our IFRS Newsletters page for the latest discussions on these issues, as well as the macro hedge accounting project.

And go to our IFRS – Financial instruments hot topics page for more on these and other aspects of financial instruments accounting under IFRS.

© 2022 KPMG Huazhen LLP, a People's Republic of China partnership, KPMG Advisory (China) Limited, a limited liability company in Mainland China, KPMG, a Macau (SAR) partnership, and KPMG, a Hong Kong (SAR) partnership, are member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.

For more detail about the structure of the KPMG global organisation please visit


Connect with us