SIC-5
Historical
Classification of Financial Instruments–Contingent Settlement Provisions
Addressed classification of financial instruments with contingent settlement provisions as liabilities or equity. Withdrawn in 2003.
Historical Reference
SIC-5 was withdrawn in March 2003 when the IASB issued a revised IAS 32 Financial Instruments: Presentation, which incorporated contingent settlement provisions guidance into the liability/equity classification framework.
This page is retained for historical and comparative reference. Entities should refer to the current standard that superseded this interpretation for authoritative guidance.
Current Standard
IAS 32 Financial Instruments: Presentation 1
What SIC-5 Addressed (Historical)
What SIC-5 addressed
SIC-5 addressed the classification of financial instruments that contain contingent settlement provisions. It clarified when such provisions cause the instrument to be classified as a financial liability rather than equity, particularly where the settlement amount is linked to a variable number of the entity's own equity instruments.
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The Conclusion It Reached (Historical)
The conclusion it reached
SIC-5 concluded that if the settlement amount is linked to a variable number of the entity's own equity instruments, the instrument should be classified as a financial liability. Only when the settlement amount is fixed (not linked to a variable number of shares) should the instrument be considered equity. This ensures that the substance of the obligation, not merely its legal form, drives classification.
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Where This Guidance Lives Today
Where this guidance lives today
Superseded byIAS 32 Financial Instruments: Presentation
Why withdrawnThe 2003 revision incorporated contingent settlement provisions guidance into the liability/equity classification framework
Current statusWithdrawn
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Glossary
Contingent settlement provision
A contractual provision that requires the issuer to deliver a variable number of its own equity instruments upon settlement.
Financial liability
Any contractual obligation to deliver cash or another financial asset to another entity, or to exchange financial assets or liabilities under conditions that are potentially unfavourable.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Jan-1998
In January 1998 the Standing Interpretations Committee issued SIC-5 Classification of Financial Instruments–Contingent Settlement Provisions.
Apr-2001
In April 2001 the International Accounting Standards Board adopted SIC-5.
Minor consequential amendment to SIC-5
Mar-2003
In March 2003 the Board issued a revised IAS 32 Financial Instruments: Presentation which superseded SIC-5.
Superseded by revised IAS 32