Comment Letter to the FASB: Liability and Equity

Comments by the Financial Accounting Standards Committee of the American Accounting Association to FASB's decisions concerning the liabilities and equity project are presented. The Committee's primary concern is that it believes the Board's decision so far reflect inconsistent applica...

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Bibliographic Details
Published in:Accounting horizons 1999-09, Vol.13 (3), p.305-307
Main Authors: Wahlen, James M., Boatsman, James R., Herz, Robert H., Jennings, Ross G., Jonas, Gregory J., Palepu, Krishna, Petroni, Kathy R., Ryan, Stephen G., Schipper, Katherine
Format: Article
Language:English
Subjects:
Accounting
Accounting procedures
Balance sheets
Committees
Equity
Exposure drafts
Fair value
Financial analysis
Financial instruments
Financial leverage
Financial statements
Insolvency
Liabilities
Liability
Preferred stock
Risk assessment
Stockholders
Valuation
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Summary:Comments by the Financial Accounting Standards Committee of the American Accounting Association to FASB's decisions concerning the liabilities and equity project are presented. The Committee's primary concern is that it believes the Board's decision so far reflect inconsistent application of 2 important but distinct purposes or decision criteria for distinguishing liability and equity. The 2 purposes are: 1. insolvency risk assessment, and 2. common equity valuation, including the assessment of the effect of various types of financial leverage on the volatility of the return on common equity. The decision criteria corresponding to these purposes are described and specific examples illustrating what is believed to be the inconsistent application of these criteria by the Board are provided.
ISSN:0888-7993
1558-7975
DOI:10.2308/acch.1999.13.3.305