ASB Issues Amendment To FRS 25

by Jason Gorringe, Tax-News.com, London

20 August 2008

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

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 ASB explained.

The amendment contained in this document will be effective for accounting periods beginning on or after 1st January, 2010.

The Board went on to explain that early adoption is only permitted for accounting periods beginning on or after 1st 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.

Recommended