Background
1
Co-operatives and other similar entities are formed by groups of persons to meet common economic or social needs. National laws typically define a co-operative as a society endeavouring to promote its members’ economic advancement by way of a joint business operation (the principle of self-help). Members’ interests in a co-operative are often characterised as members’ shares, units or the like, and are referred to below as ‘members’ shares’.
2
AASB 132 establishes principles for the classification of financial instruments as financial liabilities or equity. In particular, those principles apply to the classification of puttable instruments that allow the holder to put those instruments to the issuer for cash or another financial instrument. The application of those principles to members’ shares in co-operative entities and similar instruments is difficult. Some of the Australian Accounting Standards Board’s constituents have asked for help in understanding how the principles in AASB 132 apply to members’ shares and similar instruments that have certain features, and the circumstances in which those features affect the classification as liabilities or equity.