Distinctions Of Debt And Equity Clarified - Brief Article

California CPA, Jan, 2001

FASB issued a proposed statement that would establish accounting standards for financial instruments with characteristics of liabilities, equity or both. Comments on the proposed statement are requested by March 31, 2001.

"Financial reporting has always had difficulty dealing with financial instruments that blur the line between debt and equity, especially compound instruments like convertible debt that combine both debt and equity components," explains FASB Senior Project Manager Diana Willis. "This proposed statement would clarify the distinction between debt and equity."

During the comment period, a copy of the proposal will be available free from the FASB order department by calling (800) 748-0659. The proposal is also available at: http://www.rutgers.edu/Accounting/raw/fasb/new/index.html, under Exposure Drafts.