Brussels, 13 September 2004

Dear Sir David,

EURO COOP - the European Community of Consumer Co-operatives - is the representative body for European consumer co-operatives. Founded in 1957, our primary objectives include representing the interests of consumer co-operatives and their consumer-members. Our membership base comprises national organisations of consumer co-operatives from 18 european countries, with in excess of 30,000 sales outlets, 300,000 employees and 22 million consumer-members.

EURO COOP is pleased to be able to comment on the above Draft Interpretation D8 to International Accounting Standard 32 Financial Instruments: Disclosure and Presentation.

Many of our member organisations believed that in applying the new IAS 32 definitions of equity and financial liabilities, the long-standing fundamental right of their members to request and receive redemption of their shares would be threatened. They were also concerned at the negative effects the new IAS 32 would have on their balance sheets and subsequent ratings as a result of members' shares being considered liabilities henceforth. Such sweeping changes would have threatened a century of otherwise exemplary corporate governance and successful, sustainable business practices. Moreover, application of the new IAS 32 risked limiting consumer co-operatives' future prospects by affecting their ability to attract new members and new members' shares.

In the light of the above, we welcome the Draft Interpretation D8 to IAS 32, although we regret that the interpretation foresees members' shares being considered equity in only two main cases, i.e., if the consumer co-operative has the unconditional right to refuse to redeem the shares or if it has the obligation (e.g., under law) to refuse to redeem, and/or if the statutes or underlying law allow the fixing of a limit (below which capital must not fall as a result of redemption) which can be treated as equity.

EURO COOP believes the guidance provided in D8 is essential if the aforementioned negative effects of IAS 32 are to be mitigated. Moreover, the very form of a guidance via an interpretative note is apposite, as is the statement that the list of examples is not considered exhaustive, thus leaving the door open to other fact patterns.

We trust you will find these comments useful during the ongoing discussions of IFRIC Draft Interpretation D8, and any future revision or interpretation of IAS 32 more generally.

Yours sincerely

Dónal WALSHE
Secretary General.