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The FRC´s responses to the questions contained in the ‘Invitation to Comment’ section of the ED are included in the Appendix to its letter. However, the FRC has the following overarching comments, relating to the scope of the draft Interpretation, which the FRC sets out below.
a) NCI forwards – The FRC believes that the scope of the interpretation should be extended to include NCI forwards. The FRC does not believe that there is a clear basis for treating NCI puts and NCI forwards differently.
b) Broader issues - Whilst the FRC agrees that this interpretation provides a short term solution, the FRC believes that this is part of a broader issue. There is a need to review the initial recognition of derivatives over own equity, holistically.
IAS 32 Financial Instruments: Presentation contains a number of exceptions and consequently derivatives over own equity can be accounted for in different ways. The FRC believes that there is a need to establish clear principles for debt equity classification. In the FRC's view, these are not issues that require urgent attention as IAS 32 is a standard that is reasonably well understood in practice. Therefore, the FRC recommends that the IASB consider these issues in time as part of its Financial Instruments with Characteristics of Equity project.