Modifications to the asset structure of cooperatives


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Modifications to the asset structure of cooperatives

The current accounting regulations in force in Spain were adapted from the international accounting standards, better known as the IAS, adopted by the European Union and established in Spain by means of the General Accounting Standards which have been in place since January 2008.

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The sectoral adaptation of the standards to cooperative accounting were recently approved. However, this adaptation was not without controversy, given the treatment applied to the assets structure of cooperatives. The main aspect for consideration refers to the capital stock of cooperatives, which may be classified as equity, liabilities or a compound financial instrument. The ninth registration and valuation standard states that “financial instruments issued, incurred or assumed shall be classified as financial liabilities, in whole or in part, wherever in accordance with their economic reality they represent a direct or indirect contractual obligation for the company to hand over cash or another financial instrument, or to exchange financial assets or liabilities with third parties on potentially unfavourable terms, such as a financial instrument which provides for a mandatory repurchase by the issuer, or which grants the holder the right to demand its redemption by the issuer on a date and for a specific or specifiable sum, or to receive predetermined remuneration provided that there are profits which may be distributed”. For cooperative societies this means that the members’ contributions, until such time as the society grants an unconditional right to reject reimbursement, become partially classified as liabilities, with a corresponding reduction, for accounting purposes, in their equity.

This provision has been in force since the start of the year, meaning that cooperatives have until the end of the year to take the relevant decisions and modify their articles of association in accordance. If the assembly rules that members’ contributions are to lose their capacity to be automatically reimbursed if the member leaves the cooperative, then those contributions could be entered in the accounts as equity, but will otherwise be classified as a liability, in other words as a debt owed by the cooperative to the member, irrespective of their legal consideration.

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