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Extinguishing Financial Liabilities with Equity

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IFRIC Draft Interpretation D25 Extinguishing Financial Liabilities with Equity Instruments is published by the International Accounting Standards Board (IASB) for comment only. Comments on the draft Interpretation should be sent in writing so as to be received by 5 October 2009. Respondents are asked to send their comments electronically to the IASB Website (www.iasb.org) using the ‘Open to Comments’ page with a copy emailed to ifric@iasb.org.

Background

A debtor and creditor may renegotiate the terms of a financial liability with the result that the liability is fully or partially extinguished by the debtor issuing equity instruments to the creditor. These transactions are sometimes referred to as ‘debt for equity swaps’. The IFRIC has received requests for guidance on the accounting for such transactions.

Scope

The [draft] Interpretation addresses only the accounting by an entity that renegotiates the terms of a financial liability and issues equity instruments to the creditor to extinguish the liability fully or partially. It does not address the accounting by the creditor.

Issues

This [draft] Interpretation addresses the following issues:

Consensus

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