Instruments with aspects of both liabilities and equity. (FASB News).FASB recently issued Statement 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. Under previous guidance, certain financial instruments could be accounted for as equity, whereas now those instruments will be classified as liabilities. The statement affects accounting for three types of freestanding financial instruments: * Mandatorily redeemable shares, where the issuing company is obligated to buy back shares in exchange for cash or assets. * Instruments "that do or may require the issuer to buy back some of its shares in exchange for cash or other assets." * Obligations that could be settled with shares, "the monetary value of which is fixed, tied solely or predominantly to a variable such as a market index Market Index An aggregate value produced by combining several stocks or other investment vehicles together and expressing their total value against a base value from a specific date. Market indexes are intended to represent an entire stock market and thus track the market's changes over time.Notes: Index values are useful for investors to track changes in market values over long periods of time., or varies inversely wit the value of the issuers' shares." To view Statement 150, go to www.fasb.org/FAS150.shtml. |
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