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IFRIC - Put options written over Non-Controlling Interests


The IFRS Interpretations Committee has issued a draft Interpretation to address diversity in practice on the remeasurement of the financial liability recognised when a parent entity writes a put option over equity shares held by non-controlling interests in a subsidiary.

The Draft Interpretation applies, in the parent's consolidated financial statements, to put options that oblige the parent to purchase shares of its subsidiary that are held by a non-controlling-interest shareholder for cash or another financial asset (NCI puts). Specifically, it requires subsequent measurement of the NCI put liability to be recognised in profit or loss.

In its final comment letter, after careful consideration of comments received, EFRAG supports the Draft Interpretation on the basis that it is a pragmatic, short-term approach to address existing diversity in practice in a manner that EFRAG accepts is consistent with IAS 32 and IAS 39. However EFRAG believes that the diversity in practice arose because of a conflict in principles in IAS 27/IFRS 10 and IFRIC 17 with IAS 32/IAS 39, and that the rationale for the Interpretations Committee's decisions should be made clear in the Basis for Conclusions.

EFRAG has published a feedback statement describing the main comments received on EFRAG's draft comment letter and how those comments were considered by EFRAG during its technical discussions in October and November 2012.

In 2013, given the overall lack of support for the draft Interpretation, the IFRS Interpretations Committee decided not to develop the interpretation further.

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