IAS 32 and IFRIC 2 - Co-operatives?

IAS 32 requires that subscription capital of co-operatives be treated as liabilities instead of equity since they're repayable on demand. This'll lead to some co-ops having negative equity. Because of this, there is a Liability/Equity project on now, but in the meantime, there's an ED proposing a quick fix. This ED provides limited exceptions to the financial liability definition in IAS 32 to give relief to certain entities with financial instruments that are akin to equity (eg partnerships, co-operative entities and mutual funds in particular). The ED proposes that financial instruments puttable at fair value should be classified as equity, provided that specific criteria are met.

My question is, if some capital is treated as liabilities, in the event of dissolution, what is the ranking order of repayment of contributions? Are members ranked with creditors? If so, among the creditors how are they ranked?


Tks, Meili, but I need to know the ranking order of payouts by the liquidator in the event of dissolution.

2 Answers

  • 1 decade ago
    Favorite Answer

    I believe the repayment would start with creditors then members. Priority would be given to secured creditors then the non secured creditors and finally the members.

    Reason being that the members would be deemed to be shareholders who would hence have the last entitlement to the residue.

  • 1 decade ago

    D8 addresses how the principles in IAS 32 for classifying financial instruments as liabilities or equity apply to instruments issued by co-operatives and other entities that give the holder the right to request redemption. D8 proposes that if members' shares would be classified as equity in the absence of the members' right to request redemption, then such shares are equity if either of the following conditions is met:

    The entity has an unconditional right to refuse redemption of the members' shares.

    Local law, regulation, or the entity's governing charter unconditionally prohibits the redemption of members' shares.

    However, if neither of those conditions is met, the shares are reported as financial liabilities. D8 further proposes that members' shares classified as financial liabilities that are redeemable on demand should be measured at the maximum amount that might become payable under the redemption provisions of the entity's governing charter or applicable law.

    IAS 32 may have co-operatives as liabilities. Check the website on this .


    you may find more of the website.

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