Submission to the IASB - D25 Extinguishing Financial Liabilities with Equity Instruments

31 August 2009

Sir David Tweedie
Chairman
International Accounting Standards Board
30 Cannon Street
London EC 4M 6XH
UNITED KINGDOM
commentletters@iasb.org.uk

Dear Sir David

D25 Extinguishing Financial Liabilities with Equity Instruments

The Group of 100 (G100) is an organization of chief financial officers from Australia’s largest business enterprises whose primary purpose is to advance Australia’s financial competitiveness. The G100 is pleased to provide comments on the exposure draft.

The G100 generally supports the scope of D25 and the proposals included for the following reasons:

consistent with the requirements of IFRS 2 ‘Share-based Payment’ and IFRS 3 ‘Business Combinations’, we believe that equity instruments of the entity can be issued as consideration to extinguish a liability and that they qualify as consideration paid under IAS 39;
the basis of measurement proposed is based on achieving the most reliable estimate. We do not believe that measurement should be driven by the carrying amount of the liability to be extinguished;
any gain or loss resulting should be recognized in the profit or loss. However, the G100 does not believe that the gain/loss should be displayed as a separate line item in the profit or loss. We consider that disclosure by way of note should be adequate.

The G100 is concerned about the proposal that the interpretation by applied retrospectively. Although the transition would apply from the beginning of the earliest comparative period it is likely that entities may encounter difficulties in determining fair values retrospectively. The G100 would support prospective application of the proposals with early adoption permitted on the condition that early adoption occurs with effect from the earliest comparative period.

Yours sincerely

Tony Reeves
National President