The European Association of Cooperative Banks (EACB) gladly takes the opportunity to comment on the EFRAG’s “Working paper: Early-stage analysis – Potential Effects of the IASB Discussion Paper on Financial Instruments with Characteristics of Equity (FICE)” issued by the EFRAG Secretariat on 28th February 2019.
The EACB appreciates the EFRAG’s efforts to address a first overview of some of the possible effects of the IASB’s DP FICE, and in particular the elements referred to in page 26 para. 4.50 and 4.51 regarding co-operative shares. As indicated in our response to the consultation on the draft EFRAG comment letter to the IASB, the fact that the provisions in IFRIC 2 alone would be carried forward is not sufficient to unequivocally dispel doubts regarding potential adverse effects on the equity classification of cooperative shares.
We would encourage EFRAG to resume these arguments also in its early stage impact assessment.
Indeed, it must be beyond any doubt that co-operative member shares and certificates are equity in the financial statement, if they are in line with the principles of IFRIC 2 and in consideration of their current loss absorbency features. We believe that the integration of IFRIC 2 into IAS 32 would allow to stress the undisputed recognition by the IASB of members’ shares as equity, and to mitigate the fact that they are treated by exception.