Consideraciones Adicionales Relevantes

Under current standards, both US GAAP and IFRS define financial liabilities and require that instruments be assessed to determine whether they meet the definition of and require treatment as financial liabilities. In very general terms, financial instruments that do not meet the definition of a financial liability are classified as equity (or mezzanine equity under US GAAP only). The US GAAP defini- tions of what qualifies as or requires treatment as a financial liability are narrower than the IFRS definitions. The narrower US GAAP definitions of what requires financial liability classification result in more instruments being treated as equity/mezzanine equity under US GAAP and comparatively more instruments being treated as financial liabilities under IFRS.

Under IFRS, contingent settlement provisions and puttable instruments are more likely to result in financial liability classification. When assessing contingent settlement provisions, IFRS focuses on whether the issuer of an instrument has the unconditional right to avoid delivering cash or another financial asset in any or all potential outcomes. The fact that the contingency associated with the settlement provision might not be triggered does not influence the analysis unless the contingency is not genuine or it arises only upon liquidation. With very limited exceptions, puttable instruments are financial liabilities under IFRS.

US GAAP examines whether the instrument in question contains an unconditional redemption requirement. Unconditional redemption requirements result in financial liability classification. Contingent settlement/redemption requirements and/or put options, however, generally would not be unconditional, as they may not occur. As such, under US GAAP, financial liability classification would not be required. SEC-listed entities, however, would need to consider the application of mezzanine equity accounting guidance. When an instrument that qualified for equity treatment under US GAAP is classified as a financial liability under IFRS, there are potential follow- on implications. For example, an entity must consider and address the further potential need to bifurcate and separately account for embedded derivatives within liability-classified host contracts. Also, because the balance sheet classification drives the treatment of disbursements associated with such instruments, classification differences may impact earnings (i.e., interest expense calculated by using the effective interest method, as opposed to dividends) as well as key balance sheet ratios.

Under IFRS, if an instrument has both a financial liability component and an equity component (e.g., redeemable preferred stock with dividends paid solely at the discretion of the issuer), the issuer is required to separately account for each component. The liability component is recognized at fair value calculated by discounting the cash flows associated with the liability component at a market rate for a similar debt host instrument, and the equity component is measured as the residual amount. US GAAP generally does not have the concept of compound financial instruments outside of instruments with equity conversion features.

For hybrid instruments that contain equity conversion options, IFRS generally requires split accounting of the equity conversion feature and the debt host. While there are circumstances where US GAAP also requires split accounting, there are also circumstances under which a singular accounting model is followed.

presentation while also impacting earnings (mainly due to recognition of interest expense at the market rate at inception as opposed to any contractual rate within the compound arrangement).

Whether an instrument (freestanding or embedded) that is settled by delivery or receipt of an issuer’s own shares is considered equity may be a source of significant differences between IFRS and US GAAP. For example, net share settlement would cause a warrant or an embedded conversion option to fail equity classification under IFRS; under US GAAP, a similar feature would not automatically taint equity classification, and further analysis would be required to determine whether equity classification is appropriate. Likewise, a derivative contract with settlement alternatives that includes one that does not result in equity classification (e.g., a choice between gross settlement and net cash settlement) would fail equity classification under IFRS even if the settlement choice resides with the issuer.

There are some significant differences in the treatment of written puts that will be settled by gross receipt of an entity’s own shares. Under US GAAP, such items are measured initially and subsequently at fair value. Under IFRS, even though the contract in itself may meet the definition of equity if the contract is for the receipt of a fixed number of the entity’s own shares for a fixed amount of cash, IFRS requires the entity to set up a financial liability for the discounted value of the amount of cash it may be required to pay. Additional differences exist relating to financial liabilities that are carried at amortized cost. For these financial liabilities, both IFRS and US GAAP use the effective interest method to calculate amortized cost and allocate interest expense over the relevant period. The effective interest method is based on the effective interest rate calculated at initial recognition of the financial instrument. Under IFRS, the effective interest rate is calculated based on estimated future cash flows through the expected life of the financial instru- ment. Under US GAAP, the effective interest rate generally is calculated based on the contractual cash flows through the contrac- tual life of the financial liability. Certain exceptions to this rule involve (1) puttable debt (generally amortized over the period from the date of issuance to the first put date) and (2) callable debt (a policy decision to amortize over either the contractual life or the estimated life). Under IFRS, changes in the estimated cash flow due to a closely related embedded derivative that is not bifur- cated result in a cumulative catch-up reflected in the current-period income statement. US GAAP does not have the equivalent of a cumulative-catch-up approach.

Classification

Contingent settlement