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Commission Regulation (EC) No 1725/2003 of 29 September
2003 adopting certain international accounting standards
in accordance with Regulation (EC) No 1606/2002 of the
European Parliament and of the Council.
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Earnings per share - financial
instruments and other contracts that may be settled in
shares
Paragraph 11 of IAS 1 (revised 1997), presentation of
financial statements, requires that financial statements
should not be described as complying with International
Accounting Standards unless they comply with all the
requirements of each applicable standard and each applicable
interpretation issued by the Standing Interpretations
Committee. SIC interpretations are not expected to apply to
immaterial items.
Reference: IAS 33, earnings per share.
Issue
1. There are various forms of financial instruments or
other contracts that may be settled by a reporting enterprise
either by payment of financial assets or by payment in the
form of a transfer of ordinary shares of the reporting
enterprise to the holder. In some cases, the manner of
settlement is chosen by the issuer of the financial instrument
and in other cases the manner of settlement is chosen by the
holder of the financial instrument. An example of this type of
instrument is a contractual obligation of the reporting
enterprise that may be settled by payment of cash or issuance
of ordinary shares of the reporting enterprise.
2. The issue is whether financial instruments or other
contracts that may be settled by payment of financial assets
or issuance of ordinary shares of the reporting enterprise, at
the option of the issuer or the holder, are potential ordinary
shares under IAS 33.
3. This interpretation addresses contracts that specify
such alternative settlement methods in their terms.
Consensus
4. All financial instruments or other contracts that may
result in the issuance of ordinary shares of the reporting
enterprise to the holder of the financial instrument or other
contract, at the option of the issuer or the holder, are
potential ordinary shares of the enterprise.
Date of consensus: February 2000.
Effective date: this interpretation becomes effective on 1
December 2000. Comparative information presented and disclosed
in financial statements under IAS 33.47-52 should be restated
for the effect of applying this interpretation.
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