Skip to content
Show Sections

Current stage

In November 2023, the International Accounting Standards Board (IASB) published the Exposure Draft Financial Instruments with Characteristics of Equity. The IASB proposed amendments to IAS 32 Financial Instruments: Presentation, IFRS 7 Financial Instruments: Disclosures, and IAS 1 Presentation of Financial Statements* to address the existing challenges in companies’ financial reporting of financial instruments with characteristics of equity.

The proposals include:

  • clarification of the underlying classification principles of IAS 32 to help companies distinguish between financial liabilities and equity;
  • disclosures to further explain complexities around instruments that have both financial liability and equity characteristics; and
  • presentation requirements for amounts—including profit and total comprehensive income—attributable to ordinary shareholders separately from amounts attributable to other holders of equity instruments.

The comment period closed on 29 March 2024. The IASB is considering stakeholder feedback and redeliberating the proposals.

* In April 2024 the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements which replaces IAS 1. IFRS 18 has an effective date of 1 January 2027.

IASB® Update April 2026

The IASB met on 20 April 2026 to continue redeliberating the proposed requirements in the Exposure Draft Financial Instruments with Characteristics of Equity. The IASB discussed the proposed amendments to IAS 32 Financial Instruments: Presentation related to financial instruments containing contingent settlement provisions, including:

  • the type of financial instruments to which the requirements in paragraph 25 of IAS 32 apply and the accounting for discretionary payments (Agenda Paper 5A);
  • the measurement of the financial liability arising from a contingent settlement provision (Agenda Paper 5B); and
  • the meanings of the terms ‘liquidation’ and ‘not genuine’ (Agenda Paper 5C).

Proposed amendments—Contingent settlement provisions (Agenda Papers 5A–5C)

The IASB tentatively decided to proceed with the proposed requirements set out in the Exposure Draft related to the classification of financial instruments containing contingent settlement provisions, subject to minor drafting improvements and some targeted refinements, namely:

  1. clarifying that the requirements in paragraph 25 of IAS 32 apply to a financial instrument (or a component of one) that could require settlement giving rise to a financial liability only as a result of the occurrence or non-occurrence of an uncertain future event that is beyond the control of both the issuer and the holder.
  2. clarifying that, for the purposes of an entity applying paragraph 36 of IAS 32, dividend payments are recognised as expenses if shares are wholly classified (instead of recognised) as liabilities to resolve an inconsistency within the Standard.

    All 13 IASB members agreed with these decisions.

  3. describing liquidation as a process that has the objective of permanently ceasing an entity’s operations and includes activities such as converting assets, paying obligations and settling equity claims.
  4. clarifying that when an entity assesses whether a contractual term is ‘not genuine’, it considers both the probability and nature of the contingent event, including whether the event has a substantive business purpose. A contractual term with a substantive business purpose would be considered genuine, even if the probability of the event is remote.

    All 13 IASB members agreed with these decisions.

The IASB tentatively decided not to proceed with the proposed requirements related to the measurement of the financial liability arising from a contingent settlement provision as part of the project on Financial Instruments with Characteristics of Equity. Instead, the IASB tentatively decided to respond to the measurement-related issues as part of the project on Amortised Cost Measurement.

All 13 IASB members agreed with this decision.

Next milestone

Final Amendments