BDO CL 2023-02

This is typically in cases where the underlying shares subject to the VWAP mechanism are very thinly traded at such a low level such that the VWAP mechanism is considered appropriate in approximating the fair value of the entity’s shares and the purpose of the VWAP mechanism is to approximate the fair value of the equity instruments used in an anti-dilution calculation. [...] As noted below, in a business combination in which an acquirer purchases 80% of the equity instruments of the acquiree, with a put option being 8 granted to the legal owners of remaining 20%, it is common for dividend blockers and other contractual terms to be included, such that the acquirer has exposure to 100% of the returns of the acquiree from the date of acquisition of the 80% interest. [...] We do support this basis being followed in paragraph 23 for obligations for an entity to purchase its own shares due to the specific nature of the obligation and the fact that the obligation envisaged in paragraph 23 is not arising due to events outside the control of the issuer and the holder of the instrument. [...] The proposed amendment may also lead to certain anomalous accounting in cases where the amount payable to settle the instrument on the occurrence of the contingent event exceeds the maturity amount of the instrument or the proceeds received on issue of the instrument. [...] We believe that the proposed disclosure would help meet the information needs of the users of financial statements related to the nature and characteristics of financial instruments and the reason for the classification of the instruments as financial liabilities or equity.