21 March 2024 — Consultation Response

IASB’s exposure draft and EFRAG’s draft comment letter on financial instruments with characteristics of equity—proposed amendments to IAS 32, IFRS 7 and IAS 1

We have responded to IASB’s exposure draft on Financial Instruments: Presentation, IFRS 7 Financial Instruments: Disclosures, and IAS 1 as well as EFRAG’s draft comment letter thereon.

The effects of relevant laws or regulations

  • We agree with the IASB’s objective of improving consistency in financial reporting. We however draw the Board’s attention that such an objective shouldn’t be at the expense of providing useful information to users.
  • We are particularly concerned that the IASB’s focus on contractual terms that are incremental to laws and regulations may lead to greater inconsistency and counter intuitive outcomes in the financial reporting of similar instruments.
  • We therefore encourage the Board to reconsider the project direction on this issue and we continue to consider that the best way forward would be to adopt an “all-inclusive” approach whereby all obligations are taken into account regardless of their origin (contract, law or regulation). We nevertheless acknowledge that adopting such a principle may result in significant change to the current requirements and therefore to the current practice and may have to be accompanied by some limited exceptions to address some specific situations (e.g. bail-in features)

Obligations to purchase an entity’s own equity instruments

  • The majority of our members expressed a support for the “gross accounting method” for recognition and measurement of the liability but disagreed with the ED proposal to always remove the liability’s amount from the group equity.
  • Instead, the majority of our members believe that the debit should be recognised against non-controlling interests (NCI) therefore avoiding any “double accounting” issues. Two alternative views supported by some of our members are further detailed in our answer to question 3 in the appendix.
  • With regards to the subsequent measurement, our members had mixed views on the preferred approach. No agreement was reached on where to record the remeasurement of the liability’s fair value. Therefore, we do not express a preference in this respect.

Shareholder discretion

  • We agree with the IASB that differences of view on how to treat shareholders’ decisions created divergence in practice. In this regard, we welcome the proposed guidance.
  • We however observe that the level of judgement will remain significantly high.
  • We therefore encourage the Board to complement this guidance with examples to further illustrate the underlying principles of the proposal and help minimise the risk of diversity in application.


  • We support the introduction of guidance on reclassifications of financial liabilities and equity given the lack of guidance currently in IAS 32 and consequently the differing practices that may have been applied.
  • However, we disagree with the approach proposed by the ED. We are concerned that it could be counter-intuitive and misleading for the readers of the Financial Statements that a compound instrument remains classified as a financial liability even after the point where there is no contractual obligation to pay cash following the expiration of one of its contractual features. (e.g. a holder’s put option has expired without being exercised). Should the same feature (e.g. a put option) be a standalone instrument, it would have been accounted for differently (the liability caused by a standalone put option on NCI is reclassified to Equity when it expires leading to the derecognition of the financial liability when the contractual obligation expires).
  • We therefore encourage the Board to reconsider this proposal.