IFRS
FOR
SMES—2015
component and the principal amount payable at maturity as additional interest expense using the effective interest method (see paragraphs 11.15–11.20). (b)
in accordance with Section 12 Other Financial Instrument Issues if the liability component does not meet the conditions in paragraph 11.9.
Extinguishing financial liabilities with equity instruments 22.15A
An entity may renegotiate the terms of a financial liability with a creditor of the entity with the result that the entity extinguishes the liability fully or partially by issuing equity instruments to the creditor. Issuing equity instruments constitutes consideration paid in accordance with paragraph 11.38. An entity shall measure the equity instruments issued at their fair value. However, if the fair value of the equity instruments issued cannot be measured reliably without undue cost or effort, the equity instruments shall be measured at the fair value of the financial liability extinguished. An entity shall derecognise the financial liability, or part of the financial liability, in accordance with paragraphs 11.36–11.38.
22.15B
If part of the consideration paid relates to a modification of the terms of the remaining part of the liability, the entity shall allocate the consideration paid between the part of the liability extinguished and the part that remains outstanding. This allocation should be made on a reasonable basis. If the remaining liability has been substantially modified, the entity shall account for the modification as the extinguishment of the original liability and the recognition of a new liability as required by paragraph 11.37.
22.15C
An entity shall not apply paragraphs 22.15A–22.15B to transactions in situations in which: (a)
the creditor is also a direct or indirect shareholder and is acting in its capacity as a direct or indirect existing shareholder;
(b)
the creditor and the entity are controlled by the same party or parties before and after the transaction and the substance of the transaction includes an equity distribution by, or contribution to, the entity; or
(c)
extinguishing the financial liability by issuing equity instruments is in accordance with the original terms of the financial liability (see paragraphs 22.13–22.15).
Treasury shares 22.16
Treasury shares are the equity instruments of an entity that have been issued and subsequently reacquired by the entity. An entity shall deduct from equity the fair value of the consideration given for the treasury shares. The entity shall not recognise a gain or loss in profit or loss on the purchase, sale, issue or cancellation of treasury shares.
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