Roger Marshall, the newly appointed chair of the FRC's Accounting Council, has said the body 'broadly supports' the draft interpretation on 'Put Options Written on Non-controlling Interests' issued by the IFRS Interpretations Committee (IFRIC).

In May, the IFRS and the IASB published and invited public comment on its proposed guidance on the accounting for a put option written by a parent entity on the shares of its subsidiary held by a non-controlling-interest shareholder.

In a letter to Michael Stewart, director of implementation activities, at the IASB, Marshall said: 'The FRC broadly supports the draft interpretation on the basis that it provides clarification in practice. We agree that a put option written over NCI should be subsequently measured at fair value through profit and loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement.'

On NCI forwards, he said that the FRC 'believe that the scope of the interpretation should be extended to include NCI forwards. We do not believe that there is a clear basis for treating NCI puts and NCI forwards differently.'

He added that while he believed the interpretation provided a short term solution, 'there is a need to review the initial recognition of derivatives over own equity, holistically'.

As far as IAS 32 Financial Instruments: Presentation is concerned, he said the FRC believes that there is a need to establish clear principles for debt equity classification.

'In our view, these are not issues that require urgent attention, as IAS 32 is a standard that is reasonably well understood in practice. Therefore, we recommend that the IASB consider these issues in time as part of its Financial Instruments with Characteristics of Equity project.'

A put option is a contract that gives the holder of the option the right to sell a specified asset to the writer of the option, at a specified price, within a specified time.

If a parent entity is obliged to purchase the shares of its subsidiary for cash or for another financial asset, the parent must recognise a financial liability in its consolidated financial statements for the present value of the option exercise price. IFRIC was asked to consider how to subsequently measure that financial liability, because diversity exists in practice.

IFRIC proposed that all changes in the measurement of that financial liability should be recognised in profit or loss in accordance with IAS 39 and IFRS 9 Financial Instruments.

The draft interpretation DI/2012/2 Put Options Written on Non-controlling Interests is open for public comment until 1 October 2012.