The Accounting Standards Board (ASB) has today issued an amendment to Financial Reporting Standard (FRS) 25 (IAS 32) ‘Financial Instruments: Presentation’, to change the classification from liabilities to equity of certain financial instruments.

The amendment relates to the liability-equity classification requirements of FRS 25 for puttable financial instruments. The amendments require equity classification for certain puttable financial instruments and for certain financial instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation. These changes are in line with those made to IAS 32 by the IASB in February 2008 and, upon implementation, would ensure that no divergence between FRS 25 and IAS 32 occurs.

The amendment contained in this document will be effective for accounting periods beginning on or after 1 January 2010. Early adoption is only permitted for accounting periods beginning on or after 1 January 2009, the earliest date on which EU adoption is expected. The Board wanted to ensure that there were no discrepancies between EU-adopted IFRS (International Financial Reporting Standards) and UK GAAP (Generally Accepted Accounting Standards). As a result, the implementation date is later than that proposed in the exposure draft to allow for EU-adoption of the amendment to IAS 32 into the EU-adopted IFRS.

1. The ASB is an operating body of the Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The main role of the ASB is to contribute to the establishment of improvement of standards for financial reporting. The ASB collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both in order to influence the development of international standards and in order to ensure that its standards are developed with due regard to international developments.
3. The ASB has eleven Board members, of whom two (the Chairman and the Technical Director) are full-time, and the remainder, who represent a variety of interests, are part-time.
4. Hard copies of the Amendment can be obtained at a cost of £6.00, post-free, from FRC Publications, 145 London Road, Kingston upon Thames, Surrey KT2 6SR (020 8247 1264). Web: www.frcpublications.com.
5. Press enquiries should be addressed to Ian Mackintosh (Chairman) on 020 7492 2434, David Loweth (Technical Director) on 020 7492 2420 or Seema Jamil-O’Neill (Project Director) 020 7492 2422.