The loss absorption capacity created by capital contributed by members justifies the treatment of members' capital as equity not debt, even though members' capital shares may be capable of being repurchased by the co-operative. Members' shares constitute part of a co-operative's own capital resources that guarantee the co-operative's continuation in business. In other words, members' capital should be treated as part of the co-operative's equity capital not as debt (a liability on the co-operative's balance sheet). This is an important reality to understand, particularly given the current policies and directives of the International Accounting Standards Board on the accounting and financial treatment of co-operative members' shares.

To achieve a standard global accounting treatment of this capital and indivisible reserves, accumulated over time, as equity capital not debt, under no circumstances should members' non-withdrawable share capital and indivisible reserves be subject to any risk of distribution to co-operative members.

Treating members' non-withdrawable share capital and indivisible reserves as equity capital is particularly important for co-operative banks where members' capital needs to be treated as part of a co-operative bank's 'Core Tier 1 Equity Capital' when the bank's capital adequacy ratio and total risk-weighted assets is calculated by central banks.

The historic treatment of members' capital as part of a co-operative's own capital resources that underpins its business operations, rather than as debt, is clearly shown by the first share register of the Rochdale Society of Equitable Pioneers. The pages of the register show the wealth of members increasing through the payment of dividend on their purchases. It also shows how members left their dividend in the hands of their co-operative society to provide capital for its growth and to underpin its operations. Capital of the members' own providing was fundamental to the Rochdale Pioneers' success.