Looking at ways to improve IAS 32
At its February meeting, the Board continued to explore the three approaches identified as potential ways of improving IAS 32 Financial Instruments: Presentation. It considered the use of sub-classes of financial liabilities and equity as well as claims with conditional alternative settlement outcomes.
“The latest Board discussions have highlighted the need to further explore presentation options as a means to address the shortcomings of a binary classification approach.”
For more detail on these discussions, read Issue 28 of our IFRS Newsletter: Financial Instruments.
As financial markets have become more sophisticated, the number and complexity of financial instruments has increased. A single distinction between liabilities and equity cannot convey all of the similarities and differences between claims.
For this reason, the Board decided that the objective of the project should include exploring potential improvements to presentation and disclosure in addition to improvements to the distinction between liabilities and equity alone.
The Board considered:
The Board also discussed claims with conditional alternative settlement outcomes. Challenges arise when establishing whether the entity has the right to avoid a liability settlement outcome.
The next step for the project will be to further develop the approaches discussed so that the Board can ultimately form a preliminary view on its preferred approach.
The macro hedge accounting project was not discussed during the February meeting.
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