In November 2009, the IASB issued IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments”. The Interpretation has yet to be endorsed by the European Union and incorporated into European law.

The Interpretation specifies that a borrower who issues equity instruments to a creditor to extinguish all or part of a financial liability shall treat these equity instruments as “consideration paid” in accordance with IAS 39.41. The borrower entity shall remove a financial liability (or part of a financial liability) from its statement of financial position. The borrower shall measure the equity instruments issued to the creditor at fair value unless that fair value cannot be reliably measured. If the fair value of the equity instruments issued cannot be reliably measured, then the equity instruments shall be measured to reflect the fair value of the financial liability extinguished. The difference between the carrying amount of the financial liability (or part of a financial liability) extinguished, and the consideration paid, shall be recognised in profit or loss.