FASB issues statement on accounting for certain financial instruments, exposure draft on special-purpose entities

CPA Letter, The, July, 2003 by Anonymous

The Financial Accounting Standards Board has issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. The statement improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. This new statement requires that those instruments be classified as liabilities.

Statement 150 affects the issuer's accounting for various types of freestanding financial instruments. It does not apply to features embedded in a financial instrument that is not a derivative in its entirety. It also requires disclosures about alternative ways of settling the instruments and the capital structure of entities, all of whose shares are mandatorily redeemable.

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