International GAAP 2013: Generally Accepted Accounting Principles under International Financial Reporting Standards

Chapter 45

Financial instruments: Financial liabilities and equity

1 Introduction

1.1 Background

1.2 Development of IFRS on classification of liabilities and equity

2 Objective and Scope

2.1 Objective

2.2 Scope

3 Definitions

4 Classification of Instruments

4.1 Definition of equity instrument

4.2 Contractual obligation to deliver cash or other financial assets

4.2.1 Relationship between an entity and its members

4.2.2 Implied contractual obligation to deliver cash or other financial assets

4.3 Contingent settlement provisions

4.3.1 Contingencies that are ‘not genuine’

4.3.2 Liabilities that arise only on liquidation

4.3.3 Liabilities that arise only on a change of control

4.3.4 Some typical contingent settlement provisions

4.4 Examples of equity instruments

4.4.1 Issued instruments

4.4.2 Contracts to issue equity instruments

4.5 Preference shares and similar instruments

4.5.1 Instruments redeemable mandatorily or at the holder's option

4.5.2 Instruments redeemable only at the issuer's option or not redeemable

4.5.3 Instruments with a ‘dividend blocker’ clause

4.5.4 Perpetual instruments with a ‘step-up’ clause

4.5.5 Relative subordination

4.5.6 Economic compulsion

4.5.7 ‘Linked’ instruments

4.5.8 ‘Change of control', ‘taxation change’ and ‘regulatory change’ clauses

4.6 Puttable instruments and instruments repayable only on liquidation

4.6.1 The issue

4.6.2 Puttable instruments

4.6.3 Instruments entitling the holder to a pro rata share of net assets only on liquidation

4.6.4 Clarification ...