ASCG comment letter on the ED/2023/5 Financial Instruments with Characteristics of Equity (FICE)

Last Friday, the ASCG has submitted its comment letter on the IASB’s draft ED/2023/5 Financial Instruments with Characteristics of Equity.

Our Financial Reporting Technical Committee confirms the IASB’s general findings that applying current IAS 32 requirements works well for most financial instruments, that it broadly results in appropriate classification, and does generally provide useful information. Consequently, we agree that a funda­mental review of IAS 32, as envisaged in the proposals from the IASB Discussion Paper DP/2018/1, is neither necessary nor desirable. Further, the Technical Committee acknowledges that many application issues have been resolved during long-term experience and practice in applying IAS 32.

On this basis, we explicitly support the ED’s objective to clarify and resolve known application issues and, thus, to focus on selected IAS 32 requirements only.

As regards the specific proposals in the ED, we like to confirm that the IASB has touched on the most significant issues and application challenges arising from applying current IAS 32 requirements. The Technical Committee is aware that among all the ED’s proposals the issues/questions related to “effects of relevant laws or regulations”, “purchase own equity instruments”, and “disclosures” are most crucial and most relevant. The Technical Committee does not fully support the respective proposals. Notwithstanding this, we agree with many other proposals in the ED.

For more details on our findings on the specific proposals in the ED, we refer to our responses to the questions. The ASCG’s comment letter was preceded by a public outreach event involving the IASB, EFRAG and AFRAC on 4 March 2024, the results of which can still be downloaded here.