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Commission Regulation
(EC) No 2237/2004 of 29 December 2004 amended
by
Regulation (EC) No 2237/2004
and
Regulation (EC) No 1864/2005
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Treasury Shares (see
also paragraph AG36)
33. If an entity
reacquires its own equity instruments, those instruments
(‘treasury shares’) shall be deducted from equity.
No gain or loss shall be recognised in profit or
loss on the purchase, sale, issue or cancellation
of an entity’s own equity instruments. Such treasury
shares may be acquired and held by the entity or by
other members of the consolidated group.
Consideration paid or received shall be recognised
directly in equity.
34. The amount of
treasury shares held is disclosed separately either on the
face of the balance sheet or in the notes, in accordance with
IAS 1 Presentation of Financial Statements. An entity
provides disclosure in accordance with IAS 24 Related Party
Disclosures if the entity reacquires its own equity
instruments from related parties.
Interest, Dividends,
Losses and Gains (see also paragraph AG37)
35. Interest,
dividends, losses and gains relating to a financial instrument
or a component that is a financial liability shall be recognised
as income or expense in profit or loss. Distributions to
holders of an equity instrument shall be debited by the
entity directly to equity, net of any related
income tax benefit. Transaction costs of an
equity transaction, other than costs of issuing an equity
instrument that are directly attributable to the
acquisition of a business (which shall be
accounted for under IAS 22), shall be accounted
for as a deduction from equity, net of any related income
tax benefit.
36. The
classification of a financial instrument as a financial
liability or an equity instrument determines whether interest,
dividends, losses and gains relating to that instrument are
recognised as income or expense in profit or loss. Thus,
dividend payments on shares wholly recognised as liabilities
are recognised as expenses in the same way as interest on a
bond. Similarly, gains and losses associated with redemptions
or refinancings of financial liabilities are recognised in
profit or loss, whereas redemptions or refinancings of equity
instruments are recognised as changes in equity. Changes in
the fair value of an equity instrument are not recognised in
the financial statements.
37. An entity
typically incurs various costs in issuing or acquiring its own
equity instruments. Those costs might include registration and
other regulatory fees, amounts paid to legal, accounting and
other professional advisers, printing costs and stamp duties.
The transaction costs of an equity transaction are accounted
for as a deduction from equity (net of any related income tax
benefit) to the extent they are incremental costs directly
attributable to the equity transaction that otherwise would
have been avoided. The costs of an equity transaction that is
abandoned are recognised as an expense.
38. Transaction
costs that relate to the issue of a compound financial
instrument are allocated to the liability and equity
components of the instrument in proportion to the allocation
of proceeds. Transaction costs that relate jointly to more
than one transaction (for example, costs of a concurrent
offering of some shares and a stock exchange listing of other
shares) are allocated to those transactions using a basis of
allocation that is rational and consistent with similar
transactions.
39. The amount of
transaction costs accounted for as a deduction from equity in
the period is disclosed separately under IAS 1 Presentation
of Financial Statements. The related amount of income
taxes recognised directly in equity is included in the
aggregate amount of current and deferred income tax credited
or charged to equity that is disclosed under IAS 12 Income
Taxes.
40. Dividends
classified as an expense may be presented in the income
statement either with interest on other liabilities or as a
separate item. In addition to the requirements of this
Standard, disclosure of interest and dividends is subject to
the requirements of IAS 1 and IAS 30 Disclosures in the
Financial Statements of Banks and Similar Financial
Institutions. In some circumstances, because of the
differences between interest and dividends with respect to
matters such as tax deductibility, it is desirable to disclose
them separately in the income statement. Disclosures of the
tax effects are made in accordance with IAS 12.
41. Gains and losses
related to changes in the carrying amount of a financial
liability are recognised as income or expense in profit or
loss even when they relate to an instrument that includes a
right to the residual interest in the assets of the entity in
exchange for cash or another financial asset (see paragraph
18(b)). Under IAS 1 the entity presents any gain or loss
arising from remeasurement of such an instrument separately on
the face of the income statement when it is relevant in
explaining the entity’s performance.
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