The World Council of Credit Unions supports the existing accounting treatment of cooperative shares as equity, but asked for some clarifications in a letter to the International Accounting Standards Board (IASB) sent this week. The letter was sent in response to a discussion paper on the characteristics of equity issued by the London-based IASB.
Specifically, the World Council strongly supports continuing the IASB’s existing approach to classifying cooperative shares as equity when the cooperative has an unconditional right to refuse redemption of the shares.
“Credit unions and other co-operative depository institutions typically have an unconditional right to refuse the redemption of co-operative shares that qualify as regulatory capital,” the letter reads.
World Council also urged the board to clarify that enforceable rights and obligations arising from “legal or regulatory requirements” are equivalent to enforceable rights and obligations arising from contractual provisions, at least for purposes of distinguishing equity instruments from liabilities.
“We believe that the relevant question from an economic-consequences standpoint is whether a contingent right or obligation that can convert a claim from a liability to equity, or from equity to a liability, has been exercised or not,” the letter reads.