Eumedion calls for ‘relevance’ above ‘consistency’ for the classification of equity-like financial instruments
News · 20-03-2024
Eumedion welcomes most of the International Accounting Standards Board (IASB)’s proposals to improve presentation and disclosures related to financial instruments with the characteristics of equity (FICE). Eumedion is particularly pleased with the proposed requirement to disclose the maximum dilution that a FICE can cause to the number of common shares outstanding. Eumedion suggests extending this disclosure requirement to the potential dilutive effects on the number of voting rights.
The key concern Eumedion raises, relates to the proposed classification of FICE. The IASB proposes a consistent approach where the initial classification is not allowed to change over time, even if the characteristics do materially change. Eumedion attests that in such cases relevance should prevail over consistency. Relevance brings more clarity and limits the scope for gaming the standard.
Eumedion also proposes a more insightful presentation format for infrequent cases where a company has written a put-option on the shares of a subsidiary it does not fully own.