Problems of equity’s accounting in agricultural cooperatives

Abstract

After the amendments of IAS 32 Financial instruments: presentation came into effect in 2005, it was set that any financial instrument, that may be returned upon the holder’s request, has to be regarded as a liability, regardless to its legal status. The provisions of equity’s definition and classification of financial instruments caused special interest of the researchers, thus the International Accounting Standards Board announced the amendments of IAS 32 in 2008, which were directly related to the classification and recognition of financial instruments in cooperatives. The goal of this research is to disclose the peculiarities of equity accounting in agricultural cooperatives and to present the suggestions on the methodology improvements of accounting and presentation of information in financial reports. According to the IAS 32, the equity approach was chosen as the main method to describe the financial instruments. Therefore there have been suggestions in the literature to clearly define the characteristics of membership in cooperative and the shares of members (participants). This is as well related to the fact that, due to the main principles of the cooperatives, the member contributions are characterized by different features than the shares of other types of businesses. The researchers also noticed that the usual equity and debt financial instruments are currently getting more mixed resulting in hybrid instruments which accounting classification is getting more complicated. According to the amendments made to IAS 32 in 2008, whereby certain instruments issued by cooperatives were re-classified as equity (classified as liabilities according to the previous edition of IAS 32), certain countries have corrected their legal acts that regulate the activities of cooperatives.[...]