Statement 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity , affects the issuer’s accounting for three types of financial instruments, according to a news release. Those are:
- redeemable preferred stock
- put options and forward purchase contracts
- obligations that can be settled with shares.
Previously, all three instruments could be counted as equity instruments.
The revisions are part of a two-part project on liabilities and equities. FASB currently is planning on a second phase of its project for later this year that will address the accounting for convertible bonds and other financial instruments with embedded features of both liabilities and equity.
Most of the guidance in Statement 150 is effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. For private companies, mandatorily redeemable financial instruments are subject to the provisions of this statement for the fiscal period beginning after December 15, 2003.
Due to the early effective date of most provisions of Statement 150, the full text of the document is now available on the FASB’s Web site at http://www.fasb.org/FAS150.shtml . Printed copies will be mailed to subscribers on or about May 23, 2003. Copies also will be available after that date from the FASB Order Department by calling (800) 748-0659.