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IFRIC 2 - Members' Shares in Co-operative Entities


Members' shares in co-operative entities have some characteristics of equity. They also give the holder the right to request redemption for cash, although that right may be subject to certain limitaitons. IFRIC 2 gives guidance on how those redemption terms should be evaluated in determining whether the shares should be classified as financial liabilities or as equity. Under IFRIC 2, shares for which the member has the right to request redemption are normally liabilities. However, they are equity if:

  • the entity has an unconditional right to refuse redemption; or 
  • local law, regulation, or the entity's governing charter imposes prohibitions on redemption. But the mere existence of law, regulation, or charter provisions that would prohibit redemption only if conditions (such as liquidity constraints) are met, or are not met, does not result in members' shares being equity.

On 9 September 2004 EFRAG published its comment letter and on 17 January 2005 EFRAG issued its Endorsement Advice to the European Commission (documents can be found below).

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