Response to the FASB discussion memorandum 'Distinguishing B

The American Accounting Association's Financial Accounting Standards Committee believes that the current definition structure for debt and equity need not be reexamined. However, the Committee recommends that the FASB illustrate how the definitions in Concepts 6 are to be applied. The Committee...

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Bibliographic Details
Published inAccounting horizons Vol. 7; no. 3; p. 105
Main Authors Weygandt, Jerry J, Collins, William A, Crooch, G Michael, Heath, Loyd C
Format Journal Article
LanguageEnglish
Published Sarasota American Accounting Association 01.09.1993
Subjects
Classification
Committees
Compensation
Equity
Exposure drafts
Financial accounting standards
Financial instruments
Financial reporting
Financial statements
Legal fees
Liabilities
Liability
Market prices
Shareholders equity
Stock options
Stock rights
Stockholders
United States > US
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Summary:The American Accounting Association's Financial Accounting Standards Committee believes that the current definition structure for debt and equity need not be reexamined. However, the Committee recommends that the FASB illustrate how the definitions in Concepts 6 are to be applied. The Committee believes that a financial instrument, such as mandatorily redeemable preferred stock, that obligates an enterprise to redeem or repurchase its own stock for a specified or determinable amount should be classified as a liability instrument. The Committee also recommends that the difference between the issuance price and the mandatory redemption price be treated as a dividend rate adjustment, and amortized over the life of the liability similar to a premium or discount for bonds. The Committee believes that put options should be reported as a liability. The liability should be the proceeds from the premium, not the total repurchase price of the stock.
ISSN:0888-7993
1558-7975